Taxes are going up for Ottawa investors, but this time it’s a municipal vacant unit tax (VUT).
Foreign investors and some Canadians property owners can tack that onto their 2022 federal underused housing tax (UHT). On the upside, investors could dodge the VUT by opening their doors to renters.
Given how much you’ll pay for VUT, that could be your best income property strategy.
Is There a Vacancy Tax in Ontario?
Rising rents and absentee owners are putting pressure on Canadian cities to make housing more affordable. Enter vacancy taxes, the latest tactic to deter investors from buying and holding vacant homes until they’re flipped.
While Ontario doesn’t have a universal vacant unit tax, Ottawa, Toronto, and Hamilton have introduced their own and other cities are considering it. Sophisticated investors can brush off the cost, but the revenue VUT generates is useful for planning and building publicly funded housing. Win-win investing strategies when buying a home for rental income.
Just How Much is Ottawa Vacant Unit Tax?
The City of Ottawa levies 1% of a residential property’s assessed value for its VUT if you leave a home vacant 184 days or six months or more a year. Listing vacant homes for rent is the obvious solution. Find MPAC (Municipal Property Assessment Corporation) assessed values of your property and neighbouring homes. Declare Ottawa property here by March 16, 2023. Call 613-580-2444 or 613-580-2440 to use sign language interpreters. Where to find your Ottawa property taxes.
Who Pays Vacant Unit Tax in Toronto
Toronto charges 1% of residential units’ current value assessment for its VUT. Regardless of how a home is used, declarations are mandatory. They’re due Feb. 28 in 2023 (originally Feb. 2). Search your home’s value. Declare a Toronto residence.
Toronto residents owe VHT if property is left vacant six months a year or more. You could be exempt if:
- you bought the home during the calendar year
- it’s your principal residence
- you rented the home for at least 30 days or otherwise used it as a dwelling
- the registered owner died
- the principal resident was in hospital or lived in supportive or long-term care at least six months
- repairs, renovations, or a court order preventing you from living there for six or more months
- your principal residence is elsewhere, but you work in Toronto at least six months of the tax year.
Who Owes Federal Underused Housing Tax (UHT)
Your taxes get more complicated if you’re also liable for the federal UHT. That adds 1% of a residential portfolio’s assessed value to annual operating expenses.
UHT covers vacant or underused residential properties with up to three dwelling units.
Detached, semi-detached, row houses, condos, and similar properties, along with land necessary for their residential use and enjoyment, are on the list. Tax on rental income — expenses you can deduct.
Who’s excluded from UHT includes:
- Canadian citizens or permanent residents
- Canadian corporations listed on Canadian stock exchanges
- co-operative housing corporations and registered charities
- Indigenous governing councils or corporations
- some trusts that hold residential property.
Look over this list before structuring investments in a trust, foreign corporation, partnership, or non-sharing issuing corporation, or deciding if the UHT applies to you.
Why You Need a Real Estate Lawyer
Axess Law reviews your real estate agent’s buyer or seller representation agreement to ensure it contains essential clauses that protect property investor’s interests. What’s in the seller representation agreement (Ontario).
Buying and selling income property can be fraught with loopholes, terms, and conditions. Axess Law’s licenced real estate lawyers negotiate to amend the agreement of purchase and sale, or withdraw an offer by mutual consent. We explain the penalties if you have to walk back an offer.
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Access lawyers for less in the Greater Toronto Area, Ottawa, or anywhere in Ontario when you buy, sell, or transfer property. Axess Law’s flat fee real estate lawyers are affordable, and our rates are all inclusive (excluding taxes, disbursements, and third-party charges). Axess Law offers you only the legal services you absolutely need. Your final invoice includes no surprises or hidden charges. Your itemized statement of adjustments is explained when we deliver it, and we answer any questions you have about it.
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