Effective January 1, 2023 a new tax rule went into effect! The new Residential Property Flipping Tax Rule.
What were the reasons for introducing this Bill C-32?
Bill C-32 defines 'flipped property' as: "a housing unit of a taxpayer located in Canada that was owned by the taxpayer for less than 365 consecutive days (less than a year) prior to the disposition of the property". The measure would apply in respect of residential properties sold on or after January 1, 2023.
The legislation could have significant tax ramifications for those homeowners who sell their property within one year of purchase.
It was introduced to ensure profits made from flipping residential real estate are subject to full taxation. Specifically, profits arising from dispositions of a residential property (including a rental property) that was owned for less than 12 months would be deemed to be business income. The goverment reasons: the measure is intended to make sure flippers pay their "fair share while protecting the current, vitally important, principal residence exemption for Canadians who use their houses as homes."
As with every rule there are exceptions:
Canadians who sell their homes under specific life circumstances:
What were the reasons for introducing this Bill C-32?
Bill C-32 defines 'flipped property' as: "a housing unit of a taxpayer located in Canada that was owned by the taxpayer for less than 365 consecutive days (less than a year) prior to the disposition of the property". The measure would apply in respect of residential properties sold on or after January 1, 2023.
The legislation could have significant tax ramifications for those homeowners who sell their property within one year of purchase.
It was introduced to ensure profits made from flipping residential real estate are subject to full taxation. Specifically, profits arising from dispositions of a residential property (including a rental property) that was owned for less than 12 months would be deemed to be business income. The goverment reasons: the measure is intended to make sure flippers pay their "fair share while protecting the current, vitally important, principal residence exemption for Canadians who use their houses as homes."
As with every rule there are exceptions:
Canadians who sell their homes under specific life circumstances:
- Death
- Household addition
- Separation
- Personal safety
- Disability or illness
- Employment change
- Insolvency
- Involuntary disposition
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