Taxes and Investing in Real Estate in Canada

The Canadian real estate market is robust and potentially very lucrative. Even during the worst economic times of the new millennium, real estate in Canada weathered the storm remarkably well. Plus, there are no citizenship or residency requirements for owning property in Canada. Indeed, you can live in a Canadian residence on a temporary basis, even without residency or citizenship; though there are immigration requirements for extended stays. Still, ทาวน์โฮมมือสอง ดินแดง the market is open to investors around the world but to make the most of your investment, it is important to have a solid understanding of taxes in Canada.

Property Taxes

Property taxes in Canada will vary from province-to-province and even depending on the municipality. One of the first things you need to know is that when you buy property here, you'll have to pay a provincial transfer tax. Again, this varies between provinces, but you should expect to pay between 1 and 2% of the value of the property. Sometimes, there are exemptions to this transfer tax; for example, the first property you purchase in Canada does not carry this transfer tax.

As I've already alluded, annual property taxes are mandatory and vary by municipality. Based on the assessed value of your property as determined by the market, property taxes include fees for schools, parks, and other community amenities.

Finally, you will also pay the federal Goods and Services Tax (GST) on new home purchases. If you plan to live in the home, and it is a new or builder-renovated home, you may be eligible for a partial rebate on the GST.

Rental Property Taxes

If you plan on purchasing an investment property in Canada with the intention of renting the property for income, you need to be aware of the Canadian Income Tax Act requirements. The Act stipulates that you pay 25% of the gross property rental income as tax. Non-residents can usually choose to pay 25% of the net rental income instead; this means you can deduct many of the expenses associated with running the property - you just need to submit an NR6 form. Certain expenses cannot be deducted, however; for example, operating and expenses and capital expenses can be deducted, while the cost of furniture or equipment for a rental property cannot. Moreover, property taxes as well as mortgage, bank loan, or line of credit interest payments are all tax deductible.

Selling your Property

Pay close attention, as selling your property in Canada has different costs for residents and non-residents. Residents who occupy a property as their principal place of residence can sell a property without paying capital gains tax. If you own multiple properties, you must designate only one property as your principal place of residence. Sale of properties that are not your principal place of residence are subject to capital gains tax.

Non-residents when selling a property are subject to a 50% withholding tax, and American residents must also report the profits to the Internal Revenue Service. As you can see, there are significant tax implications for purchasing and selling properties in Canada.