Residents of British Columbia can bask in the natural wonders of one of the most spectacular corners of the world. The province’s impressive landscapes consist of forests, lakes, sandy beaches, and grand mountains, all teeming with a rich diversity of plant and animal life. British Columbia is also home to such large cosmopolitan cities as Vancouver and Victoria, which are renowned for their arts, culture, and eclectic cuisine.
However, living in British Columbia has at least one major drawback: a housing crisis that worsens yearly.
The Housing Crisis in British Columbia
While there is debate about the root causes of BC’s housing issues, it is clear that housing costs have skyrocketed. This has affected multiple demographics throughout the province, contributing to a rise in homelessness. Additionally, rental properties have become harder and harder to come by. For the younger generation, the dream of owning a home has become ever more elusive.
According to housing data from the 2021 Canadian census, published by Statistics Canada in 2022, British Columbia leads Canada as the province with the least affordable homes at a rate of 25.5 percent. (Ontario is a close second with a rate of 24.2 percent.) Therefore, issues associated with the high cost of housing are at the forefront of British Columbians’ minds.
The Homes for People Plan
The British Columbia government has enacted various measures to address the housing crisis, including the Homes for People plan. The plan was first announced in 2023 and officially came into effect on January 1, 2025.
The Plan identifies four aims and details how they can be achieved:
- Unlocking more homes, faster;
- Delivering better, more affordable homes;
- Helping those with the greatest housing needs; and
- Creating a housing market for people, not speculators.
Implementing the home flipping tax is one of the key elements of the fourth aim.
What Is Home Flipping?
Home flipping is the practice of purchasing properties with the intent to resell quickly at a profit. The Homes for People Action Plan states that speculation is intertwined with home flipping. The Plan is thus committed to combatting speculation.
Home flipping negatively impacts the real estate market by driving up home prices, rendering housing even less affordable. The goal of penalizing home flipping is to lower housing prices throughout the province, thereby promoting accessibility to British Columbians who wish to own homes in the province.
The British Columbia Home Flipping Tax
The home flipping tax was passed under the Budget Measures Implementation (Residential Property (Short-Term Holding) Profit Tax) Act, 2024. It applies to any profit earned from selling a property in British Columbia if the property was owned for less than 730 days. If a property is resold more than 730 days after it was purchased, then this tax does not apply to the profits of the resale.
How Is the British Columbia Home Flipping Tax Calculated?
The British Columbia home flipping tax rate is set at 20 percent. It applies to net taxable income from the sale of taxable property within the first 365 days of ownership. The tax gradually decreases over the next 365 days and is finally eliminated at 730 days.
Calculating the home flipping tax is not always straightforward. However, the government’s website provides a helpful tool for ascertaining the amount of tax owed for properties purchased and resold within 730 days. The calculation is based on the seller’s taxable income, net taxable income, and tax rate.
Who Is Exempt from the British Columbia Home Flipping Tax?
The British Columbia home flipping tax is not universally applicable. There are two general categories of exemptions to the tax.
Exemptions Requiring a Home Flipping Tax Return
The first group of exemptions requires that the seller file a home flipping tax return. These exemptions are for:
- Life circumstances, including death and disability;
- Builders and developers; or
- Property sales between related individuals or persons related to corporations.
Exemptions Not Requiring a Home Flipping Tax Return
A second group of exemptions does not require that the seller file a home flipping tax return, as in the following circumstances:
- The property is in an exempt location, such as a reserve or treaty land;
- The seller is an exempt entity, such as a registered charity or association;
- The property was acquired through a beneficiary of a real estate investment trust; or
- The property was used exclusively for a commercial purpose.
If any of the above exemptions apply, the property will not be subject to the home flipping tax, even if it was purchased and resold in less than 730 days.
What Is the Federal Home Flipping Tax?
Like British Columbia, Canada has taken steps to curtail home flipping by imposing a federal home flipping tax. This tax, which is distinct from British Columbia’s tax, came in response to the rising cost of homeownership throughout the country. While British Columbia is the province with the highest cost of housing, the rest of Canada struggles with the same problem.
The Canada Revenue Agency Residential Property Flipping Rule came into force on December 15, 2022. It applies to profits from the sale of property owned for less than 365 days, and the properties must have been sold on or after January 1, 2023.
The federal anti-flipping rules state that profits from selling such properties must be treated as business income rather than capital gains. The profits of the flipped property are then taxed at the individual’s tax rate.
Who Is Exempt from the Federal Home Flipping Tax?
Canada’s federal home flipping tax also has exemptions like its British Columbia counterpart. In specific situations, one can purchase and resell a property within 365 days without triggering the tax. These include:
- Death of the homeowner;
- Adoption or birth of a child;
- Divorce or separation;
- Severe disability or illness;
- Job loss or relocation; or
- Personal bankruptcy.
Homeowners in British Columbia should be aware of the implications of both the federal and provincial home flipping taxes to make informed decisions about entering the real estate market.
Looking Forward With the Home Flipping Tax
The new British Columbia home flipping tax will undoubtedly force homeowners to carefully consider the decision to purchase and resell a property within 730 days. However, whether (and to what extent) the tax will alleviate the impact of the housing crisis remains an open question. What’s certain is that British Columbians will be keeping a close watch on real estate trends as the tax changes the landscape of home flipping in the province.
Contact CM Lawyers for Trusted Real Estate Services in Vernon & Salmon Arm
The knowledgeable real estate lawyers at CM Lawyers carefully and thoughtfully guide clients through complex real estate transactions. We understand the application of home flipping rules and the intricacies of buying and selling homes in British Columbia.
With convenient locations in Vernon and Salmon Arm, CM Lawyers proudly represents clients in real estate transactions throughout Northern Okanagan and Shuswap. To schedule a consultation, please contact us online or call us in Vernon at 250-308-0338 or Salmon Arm at 250-803-9171.