Making housing more affordable is one of the most pressing issues for the Canadian government. One of the methods they are using to address the problem is through the underused housing tax.
The CRA designed the underused housing tax for vacant homeowners and non-residential property owners in Canada. The goal of the tax is to minimize the number of empty homes and penalize real estate investors not living in the city.
Who Does the Underused Housing Tax Apply To?
The UHT can impact all Canadian citizens. With that said, if you are a Canadian resident or your home serves as your primary residence, you do not have to worry about the Underused Housing Tax.
However, if you own a residential property, such as a detached house, duplex, condo, or townhouse, and leave it vacant throughout the year, you must pay the underused housing tax.
It is important to note that the Underused Housing Tax is different than the Vancouver Empty Homes Tax, and if your property is left empty throughout the year, you will likely have to pay both tax penalties.
How Much Do You Have to Pay in Underused Housing Taxes?
The tax rate of the Underused Housing Tax is 1%. To calculate what you owe, multiply the value of the residential property by the 1% tax rate. For instance, if your home’s estimated value is $500,000, you would pay $5,000 annually in underused housing taxes.
The value of the property is calculated at its taxable value. If you wish to use the current fair market file, you must file an election through the CRA.
Make Sure to Account for Underused Housing Tax if You Live Outside of Canada
The Canadian government is cracking down on vacant homes, and empty houses are now subject to the underused housing tax. If you need further advice on paying this tax, NaickerCPA is always ready to assist you. Contact us today!
If you have any questions about this article or business taxes, in general, or you want to make an appointment with an accounting professional at Naicker & Associates, please contact us at (604) 469-9369. We are based in Port Moody, BC.
