Canada’s Anti-flipping Tax: What’s Going On?

A new Canada anti-flipping tax is already hitting home sellers where it hurts, in the pocketbook.

The jury is out so far on how effective the anti-flipping tax will be at making Ontario homes more affordable.

What’s happened so far is this. 

Quick Read

Can you flip property in Canada?

What is the anti-flipping rule for 2023?

How can I avoid the anti-flipping tax?

How much tax will I pay if I flip a house in Canada?

What happens if I skip the tax?

Qualify for a mortgage in Canada. 

A real estate lawyer that would help you to avoid Anti-flipping Tax

You Asked: Is Flipping Illegal in Canada?

It’s not, but property investors who sell a house shortly after buying now owe tax on 100% of any capital gains. 

Using a home as a principal residence gives owners favourable tax deductions when they sell. Canada Revenue Agency (CRA) was pursuing home sellers to stop the practice of using the exemption to flip homes even before the new anti-flipping tax took effect. 

The new law flips the burden of proof CRA uses in federal Tax Court on its head. It allows CRA to assess business income taxes without having to prove a seller bought and sold a home strictly for profit. How to qualify for private mortgages for property investors. 

What is the Anti-flipping Tax (Canada)?

What the anti-flipping law in Canada (2023) is depends on who you talk to –

  • a smart way to stop property flips that drive up home prices
  • or government interference in Canada’s free market economy.

One thing is certain. It puts a damper on how much investors, renovation contractors, and realtors make on quick home flips, and sellers’ ability to recoup  losses.   

The anti-flipping tax affects properties sold on or after Jan. 1, 2023, targetting everyone from professional home flippers to do-it-yourselfers. Selling a home anywhere in Canada before a year is up now incurs business tax on any profits you make. 

That effectively eliminates your right to — 

  • capital gains exemptions of 50% of any profits under the Canada Income Tax Act
  • use the principal residence exemption to avoid paying any capital gains at all.

Talk to an income tax consultant for capital gains advice, especially if you operate a business from your home.

How to Avoid Anti-flipping Tax

Options to avoid paying the Canada anti-flipping tax are few. Here are some exceptions – ask a tax consultant if you’re unsure:

  1. You sold because you had to relocate.
  2. You divorced, or separated at least 90 days before selling. 
  3. Your family expanded, making the home too small for your needs.
  4. You or a related person become disabled or seriously ill.
  5. You are fired, laid off, bankrupt, or insolvent.
  6. The owner or a related person died.
  7. The home was damaged for reasons beyond your control, like a fire.

Otherwise, check here for how the principal residence exemption applies to your home. 

Penalties for Anti-flipping Tax Evaders

Claiming you don’t understand anti-flipping tax requirements won’t save you from a potential gross negligence penalty of 50% of the outstanding taxes. 

You’ll be assessed tax at the business income rate (not as capital property you used as a principal residence) and could wind up in Federal Tax Court to argue your case. 

Bring a tax lawyer. Self-representation is complicated.

Why You Need a Real Estate Lawyer

Review seller representation agreements with Axess Law to ensure they protect  your interests if you change real estate brokerages or agents. Your Axess Law real estate lawyer explains terms and conditions you may not understand. What’s in your seller representation agreement (Ontario).  

We go over offers to purchase you receive for your seller’s right to keep a good faith deposit if a buyer pulls out. Axess Law negotiates with a buyer’s lawyer on potential property defects that threaten a resale. We figure out if professional home inspection reports warrant a reduced sales price or repairs a buyer may request. 

If you plan to continue to accept offers while possible buyers conduct home inspections, we include a 48-hour clause in your agreement that can require buyers to make an immediate decision.

Your Axess Law real estate lawyer closes successful sales by searching title to property for legal claims or construction liens. We inform you if financial encumbrances stand between you and a property sale, and how to resolve them. Title transfer Ontario procedures

Buying and selling property investments on the same day is easier with Axess Law’s real estate attorneys. We liaise with banks, credit unions, trust companies, or private lenders to discharge existing mortgages. Buying investment property in Ontario

Found favourable mortgage terms for a new investment property you plan to buy? Your Axess Law real estate lawyer finalizes loan obligations by liaising with your lender to witness and sign mortgages. 25 questions to ask Ontario real estate lawyers.

Affordable Real Estate Lawyers, Anywhere You Are 

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. 

Hire a real estate lawyer near me. 

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Network remotely with real estate lawyers anywhere you are. If you’ve never used a virtual real estate lawyer before, our professional legal team shows you how. It’s quick, easy, and secure. Your entire transaction is confidential, and you can use any home computer, laptop, or compatible mobile device to conduct legal transactions from any location, at any time that’s convenient for you.

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