New anti-house-flipping federal tax rules came into effect this year (Jan 1, 2023) aimed to reduce speculation and encourage long-term home ownership.
These rules will now tax the profits from the sale of residential property as business income if the seller owned the property for fewer than 12 months.
This means the sale of the property held for less than a year will generally no longer be eligible for either capital gains tax treatment or the principal residence exemption (if owner occupied), and the CRA no longer needs to prove that the seller had the primary intention of acquiring the property to make a profit from flipping the property.
There are a few exceptions for individuals who sell their residential property within 12 months and can provide documentation to support the following major life changes:
- Death of owner,
- Involuntary termination of employment,
- Breakdown of marriage or common-law partnership,
- Involuntary disposition (e.g., due to natural disaster),
- Addition to household (including birth, adoption, or elderly parent moves in),
- Threat to personal safety,
- Serious illness or disability,
- Work relocation (new home must be at least 40 km closer to new work location).
This is another measure added by the federal government designed to reduce speculative demand in the marketplace and help to cool excessive price growth.
If you have any questions about new Anti-Flipping rules or mortgages in general, please give us a call at 250-331-0800 or send us your question in the contact us form. We’re always happy to help!