BC Home Flipping Tax 2025 - Mike Stewart

The BC Home Flipping Tax: What You Need to Know

As of January 1, 2025, British Columbia has implemented the BC Home Flipping Tax, a measure aimed at curbing speculative property sales and promoting housing stability. This tax is particularly significant for buyers and sellers of presale condos and other residential properties in BC. Here, we break down the key aspects of the tax, its implications, and what you need to consider.


What is the BC Home Flipping Tax?

The BC Home Flipping Tax is designed to deter short-term property sales, which can contribute to housing market volatility and affordability issues. It applies to profits from the sale of residential properties or the assignment of presale contracts if the ownership period is less than 730 days (two years).

This tax is distinct from the federal property flipping rules introduced by the Canada Revenue Agency (CRA) in 2023. While both policies aim to address speculative sales, they operate independently, with different criteria and enforcement mechanisms.

 


Who is Subject to the Tax?

The tax applies to individuals and entities who:

  • Sell residential properties, including houses, condos, and presale assignments, within two years of purchase.
  • Sell properties acquired before January 1, 2025, if the sale occurs on or after this date and the ownership period is less than two years.

Notably, the holding period for presale assignments begins on the date the original presale contract was signed, not the possession date.


Tax Rates

The BC Home Flipping Tax is calculated as a percentage of net taxable income from the property sale. The rates are as follows:

  • Within 365 days of ownership: 20% of the net taxable income.
  • Between 366 and 729 days: The rate decreases proportionally, reaching 0% at the 730-day mark.

This sliding scale incentivizes longer holding periods, aligning with the tax’s goal of discouraging speculative flipping.


Exemptions to the Tax

Exemptions from the BC Home Flipping Tax are divided into two categories: those that require filing a return and those that do not.

Exemptions That Require Filing a Return

Some exemptions are available only after filing a BC Home Flipping Tax return with the appropriate documentation:

  • Life Circumstance Exemptions: Includes major life changes such as death, divorce, or serious illness.
  • Exemptions for Builders and Developers: Applies to those involved in building, developing, or renovating properties.
  • Family Transfers: Exemptions for property sales or transfers between related persons.

Exemptions Without Filing a Return

Certain groups and situations are automatically exempt from the BC Home Flipping Tax without the need to file a return:

  • Exempt Property Locations: Properties located on reserves, Nisga’a lands, or treaty lands of First Nations.
  • Exempt Entities: Includes registered charities, government bodies, Indigenous Nations, and specific housing corporations.
  • Properties for Exclusive Commercial Use: If the property was used exclusively for commercial purposes during the entire ownership period.
  • Beneficiaries of Real Estate Investment Trusts (REITs): Those who acquired the property as a REIT beneficiary.

For instance, Elizabeth owns a residential property but uses it exclusively for her insurance business. After 20 months, she sells the property and is exempt from the tax.

For a detailed list of exempt locations and entities, refer to the latest government resources.


Filing Requirements

If you are subject to the tax or claiming an exemption, you must file a BC Home Flipping Tax return within 90 days of the property’s sale. Failure to file on time may result in penalties, so it’s crucial to adhere to this deadline.


Impact on Presale Condo Buyers

Presale condo assignments are a key focus of the BC Home Flipping Tax. For buyers of presale condos, the holding period starts when the original contract is signed. If you sell or assign your presale contract within two years, the tax will apply unless you qualify for an exemption.

For example, if you purchase a presale condo in January 2025 and assign the contract in December 2025, you would be subject to the tax at the 20% rate on your net profits. However, if you hold onto the property until January 2027, the tax would not apply.

Market & Economic Implications of the BC Home Flipping Tax

This tax is part of the BC NDP’s approach of regulation and taxation of the real estate market in the hope of controlling real estate prices.

Based on the chart below they have not had much success with this approach since coming to power in 2017.

Market & Economic Implications of the BC Home Flipping Tax

We feel the BC Home Flipping Tax will not work and be counter productive for the following reasons:

Market Distortion and Reduced Liquidity = Prices Rise Faster & Higher with this Tax

This tax interferes with the natural supply and demand dynamics of the real estate market. In a market, property owners should have the liberty to sell whenever they deem it financially prudent without fear of punitive measures. Additionally, the tax discourages short-term transactions, which can reduce market liquidity. Real estate markets rely on the ability to buy and sell properties quickly to adjust to changing economic conditions and personal circumstances. This reduction in supply or liquidity will cause real estate prices in BC to rise faster and higher than they would in the absence of this tax.

Disincentivizes Investment

Investors play a key role in housing markets by funding new developments and improving properties. The tax penalizes investors who might otherwise purchase, renovate, and resell properties, potentially leading to a slower turnover of substandard housing. This tax will reduce the supply of updated older properties for owner occupiers, particularly first time home buyers who often cannot afford to buy new or newer properties.

Administrative Burden

Compliance with the tax adds layers of bureaucracy for sellers and government agencies alike. This increased complexity raises transaction costs, which can deter market participation and slow economic activity. The increase in red tape and unnecessary documentation has increased dramatically since 2017 and many of our investor clients are no longer investing in the BC real estate market for this reason.

Unintended Consequences

By targeting property flipping, the tax could inadvertently decrease housing supply. Investors who would have otherwise sold properties within two years may hold onto them longer to avoid the tax, exacerbating the scarcity of available housing. This again pushes prices higher than they would increase in the absence of this tax.

Targeting Profit Motive

In a market, the profit motive drives efficiency, innovation, and resource allocation. Penalizing short-term profits can disincentivize entrepreneurial activity in the real estate sector, potentially stalling economic growth.

Reduced Flexibility

People often need to sell properties quickly due to life events such as job relocations, financial emergencies, or changes in family circumstances. The tax makes such transactions costlier and more challenging.

Moral Hazard

Policies like the BC Home Flipping Tax imply that the government knows better than individuals how the market should function. This can create a precedent for further interventions, which may erode trust in the real estate market over time as a place to store wealth for local investors.

Restrains Economic Mobility

A market economy thrives on mobility, where resources, including real estate, can be efficiently reallocated. This tax hinders economic mobility by imposing artificial constraints on property transactions.

While the tax aims to address housing affordability and speculative practices, it does so by restricting the freedom and efficiency that characterize a robust market. Balancing regulation and market dynamics is critical, and overly restrictive policies like this risk undermining long-term market health.

A better approach for the BC government to take would be to reduce tax and regulation to allow the free market to create the housing supply this province so desperately needs.


Comparing BC’s Tax with Federal Property Flipping Rules

The federal property flipping rules introduced by the CRA in 2023 also target short-term property sales. Key differences include:

  • Scope: The federal rules apply to properties held for less than 365 days, while the BC tax applies to properties held for less than 730 days.
  • Tax Rate: Federal rules treat profits as business income, fully taxable at the individual’s marginal tax rate. BC’s tax has a sliding scale, with rates reducing as the holding period increases.
  • Enforcement: Federal rules are administered by the CRA, while the BC Home Flipping Tax is managed by the provincial government.

Both taxes can apply to the same transaction, so it’s important to understand how each impacts your situation.


Recommendations for Buyers and Sellers

  1. Plan Your Transactions: If you’re considering selling a property or assigning a presale contract, evaluate the holding period to minimize tax implications.
  2. Seek Professional Advice: Consult with a tax advisor or with us to navigate the complexities of the BC Home Flipping Tax and federal rules.
  3. Stay Informed: Keep up to date with changes in provincial and federal tax policies to ensure compliance and avoid unexpected liabilities.

The BC Home Flipping Tax represents a significant shift in the province’s approach to housing market regulation. By targeting speculative sales, the tax aims to promote long-term stability and affordability. Whether you’re buying, selling, or assigning a presale contract, understanding this tax is essential to making informed decisions.

For detailed information and resources, visit the official BC government page on the Home Flipping Tax.

Please note, we are not accountants or lawyers. Please seek professional advice from a qualified accountant or lawyer on any and all tax matters in BC.