First-time home buyers received welcome news in earlier this month in a provincial budget.Any REALTORS® currently working with first-time buyers will want to share this news with them as soon as possible.
The government has announced, effective February 19, 2014, under the Property Transfer Tax (PTT) First-Time Home Buyers’ Exemption program, qualifying first-time buyers can buy a home worth up to $475,000. The previous threshold was $425,000.
What is the PTT?
The PTT is a "transfer tax" paid by a buyer in a real-estate transaction in BC. A buyer would pay 1% tax on the first $200,000 of the purchase price and 2% on the remainder. First time buyers, if they qualify (see below), were previously exempt from this tax up to $425,000 of which is now been increased to $475,000 with a partial exemption up to $500,000.
Why the change?
The partial exemption continues and will apply to homes valued between $475,000 and $500,000.
With this change, the government estimates 1,700 additional first-time buyers will annually be eligible to save up to $7,500 in PTT when they buy their home.
The government estimates this measure will cost $8 million in lost tax revenue each year.
The Real Estate Board, together with BC Real Estate Association, has actively lobbied to make home ownership more affordable for first-time home buyers. This increase in the threshold clearly signals our efforts have paid off as in past years.
In 2008, as a result of industry lobbying, the provincial government increased the threshold to $425,000 from $375,000.
In 2005, the government increased the threshold to $325,000 from $275,000.
Do you Qualify?
- be a Canadian citizen or permanent resident
- have lived in B.C. for 12 consecutive months immediately before the date you register the property or filed at least 2 income tax returns as a B.C. resident in the last 6 years
- have never owned an interest in a principal residence anywhere in the world at any time
- you have never received a first time home buyers’ exemption or refund
and the property must:
- be located in B.C.
- only be used as your principal residence
- have a fair market value of $475,000
- be 0.5 hectares (1.24 acres) or smaller
You may qualify for a partial exemption (PDF) from the tax if the property:
- has a fair market value less than $500,000
- is larger than 0.5 hectares
- has another building on the property other than the principal residence
More than one purchaser?
If one or more of the purchasers don’t qualify, only the percentage of interest that the first time home buyer(s) have in the property is eligible.
For example, if you qualify and purchase a property with a fair market value of $400,000 with a person that doesn’t qualify you would still qualify. If you owned a 60% interest in the property, 60% of the tax amount would be eligible for the exemption.
Source: Government of BC - http://www2.gov.bc.ca/