As of January 1, 2025, the new BC home flipping tax has officially come into effect, targeting individuals who sell residential properties for profit within 730 days of ownership. This tax aims to discourage short-term property speculation and is part of the Homes for People Plan.

Here’s a detailed breakdown of the BC home flipping tax, who is affected, and how it works.

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What is the BC Home Flipping Tax?

The BC home flipping tax applies to any profit made from selling residential properties in British Columbia (including presale contracts) within 730 days of ownership. The tax rate starts at 20% for properties sold within the first year (365 days) and decreases over the following 365 days. After two years, the tax no longer applies.

The tax is imposed under the Residential Property (Short-Term Holding) Profit Tax Act and is distinct from federal property flipping rules. It aims to curb short-term property flipping, supporting the province's broader affordability and housing goals.

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Who is Subject to the BC Home Flipping Tax?

The tax applies to any individual, corporation, partnership, or trust that sells a residential property within 730 days of purchase for a profit. This includes properties purchased through presale contracts.

For example:

• If you buy a property on May 1, 2023, and sell it on January 31, 2025 (642 days of ownership), the profit from the sale is taxable.
• If you sell a property after owning it for more than 729 days, such as selling on May 31, 2025 (762 days of ownership), the tax does not apply.

It’s important to note that the tax is separate from federal income taxes and applies solely to properties sold within the 730-day period.

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What is Considered Taxable Property?

Taxable property includes:

• Residential properties with housing units
• Properties zoned for residential use
• Presale contract assignments for properties under construction

The tax does not apply to:

• Leasehold interests
• Property gifts
• Properties that qualify for an exemption

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Filing a BC Home Flipping Tax Return

If you sell a property within 730 days of purchasing it, you must file a BC home flipping tax return within 90 days of the sale, unless you qualify for an exemption.

You do not need to file a return if:

• You sold the property after 729 days of ownership
• Your exemption applies automatically
• You are a developer selling presale contracts

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Exemptions from the BC Home Flipping Tax

Certain exemptions may apply, allowing you to avoid paying the tax. For instance, selling a property as your primary residence may offer deductions if certain conditions are met, such as living in the home for at least 365 consecutive days before selling.

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How is the BC Home Flipping Tax Calculated?

The tax applies to the net taxable income from the sale of a property sold within 730 days. The rate starts at 20% for properties sold within the first year (365 days) and gradually decreases in the second year. After two years, the tax is no longer applicable.

For example:

• 20% on the profit if sold within the first year
• 10% on the profit if sold between 366 and 730 days
• No tax after 730 days

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Presale Contracts and Related Persons

Special rules apply to presale contracts and sales between related persons. For presale contracts, the ownership start date is the date the contract is signed, not the completion of the property. When purchasing from a related person, you are deemed to have acquired the property at the time the related person initially purchased it.

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Primary Residence Deduction

If you sell your primary residence within 730 days of ownership, you may be eligible for a deduction of up to $20,000, provided the property was your primary residence for at least 365 consecutive days before the sale. This deduction can only be claimed if the property was your primary home during the time you owned it.

For example:

• Sam buys a home and lives in it for 20 consecutive months. Since the home was his primary residence for more than 365 days, he can claim the primary residence deduction.
• Amrita buys a condo but only lives there for 6 months. Since she didn’t meet the 365-day condition, she is not eligible for the primary residence exemption.

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Conclusion

The BC home flipping tax is a key component of the province’s strategy to address housing affordability. It targets short-term property speculation while providing exemptions for primary residences and certain transactions. Understanding this tax, how it’s calculated, and when to file a return is crucial for anyone considering selling a property in BC in the near future.

If you're considering buying or selling in British Columbia, understanding these tax implications can help you make informed decisions. For more information and personalized advice, contact us at Coldwell Banker Horizon Realty, where we specialize in navigating the local real estate market.