The Canadian government has started taxing your principal residence

Own Your Life ~ by Jessi Johnson

Rumours have been floating around for a while but are now coming to fruition.
The government has been researching the pros and cons of coming after principal residence by removing your capital gains exemption for a while now. Effective January 1, 2025, if you purchased a home less than 2 years ago and sell it for a profit, you could be subject to massive penalties.
Previously, the federal government forced you to hold the property for 12 months, but that has now doubled. Even worse, the provincial NDP government now wants in on it too. More on that shortly.
For example, let’s say you purchased a townhouse for $1,000,000 in spring of 2023 and god forbid, you renovated the home with $200,000 in upgrades. Your townhouse is likely worth around $1,400,000, now. If you sold that home, you would “roughly” have a $200,000 profit. Previously, this was yours to keep, but not anymore if you sell within two years.
So, if you already make $150,000 per year, the Federal governments adds the $200,000 to bring your new annual income for that year to $350,000.
This not only means you pay tax on the entire $200,000 but even bumps up your tax bracket so you pay a more significant percentage the entire amount. But wait, there is more. In BC, you will pay another 20% fine/tax if you sell within 12 months and a slightly discounted penalty between 12 to 24 months. This is know as the flipping tax, yes, another flippin tax
I am NOT an accountant, nor do I claim to be to ensure you speak with a professional for accounting advice specific to your situation. Are there any exemptions? Yes, a lot but, you will have to argue them.
Some examples are:

• Death of death of a related individual
  
• Serious illness or disability
  
• You are having a baby and need more space
  
• Divorce or common law separation
  
• Most native or aboriginal lands are exempt
  
• Threats to personal safety
  
• Foreclosure
  
• Bankruptcy
  
• Destruction of home due to fire or natural disaster
  

This is likely only the start, the federal government is looking at options to tax your principal residence, even if you own it longer than two years. The federal government must pay for their reckless spending somehow and homeowners are a great target for them.
Fed up and considering leaving Canada? Well, they are now taxing and penalizing you for that, too. We will leave that for another podcast.
Shocker, the government isn’t honouring existing contracts and grandfathering. So, if you bought a presale many years ago and thought all this time your investment was growing, thank again.
The government doesn’t care that you purchased it before they released this new rule and will come after your profits. Now, you might be thinking, who cares, people making money off real estate can go to hell… well, think about this
If we no longer have investors to do the maintenance and renovations required, who is left to do it? Well, that leaves you.
You might be OK with renovating and upkeep, but most people aren't.
Many people periodically update different sections of their home as needed, So you get a mismatch of renovations, which are often poorly done in the first place
People often renovate right when they take possession and then live in the unit, so when they finally sell, it is not new, often outdated and has lots of wear and tear. Many homes will not be “turnkey” like most buyers prefer
For many families, flipping a property occasionally is a side hustle
Without a side hustle or huge income, you can’t get very far in Greater Vancouver.
Remember to Own Your Life!