First Time Home Buyers’ Program: Provincial Property Transfer Tax Exemption
Property transfer tax, or PTT, is BC’s largest tax and is paid on virtually every legal transfer of land in the province.
PTT is paid by the buyer in addition to the purchase price on closing.
In BC, property transfer tax is 1% of the property purchase price up to and including $200,000, 2% of the property purchase price greater than $200,000, up to and including $2,000,000, and 3% of the purchase price greater than $2,000,000.
PTT needs to be paid upfront on closing and cannot be worked into a mortgage, so having an exemption can provide financial relief to first time buyers; however, there have long been discussions regarding the effectiveness of the First Time Home Buyers’ Program due to the criteria properties must meet in order to qualify.
In February of 2024, the province announced a change to this criteria–increasing the fair market value of properties eligible for the exemption from $500,000 or less to $835,000 or less.
This change will take effect April 1, 2024.
With this update, the requirements to qualify for this exemption are:
In order for a buyer to qualify, they must:
– Be a Canadian citizen or permanent resident;
– Have lived in BC for at least one year prior to the date the property is registered, or filed at least two income tax returns as a BC resident in the last six taxation years;
– Have never owned a registered interest in a property that was their principal residence anywhere in the world;
– Have never received any First Time Home Buyers’ exemption or refund.
In order for a property to qualify, it must:
– Be the buyer’s principal residence;
– Be 1.24 acres or less;
– Contain only residential improvements;
– Have a fair market value of $835,000 or less (effective April 1, 2024).
The “fair market value” is the purchase price of the property when it is sold in an open market, meaning anyone likely to be interested in purchasing the property can make an offer.
If all of the above requirements are met, the buyer will be exempt from property transfer tax on the first $500,000 of the purchase price, saving them $8,000 in closing costs.
There are partial exemptions for properties:
– With a fair market value between $835,000 and $860,000;
– Larger than 1.24 acres;
– With another building on the property other than the principal residence.
The legal professional involved in your transaction will apply the exemption in the property transfer tax return. Afterwhich, you must move into the home within 92 days of registering the property and continuously occupy the property as your principal residence for one year.
You can find more information about property transfer tax exemptions here.
Home Buyers’ Plan: RRSP Contributions
The Home Buyers’ Plan helps first time buyers save for the down payment towards their first home.
It does this by allowing qualifying buyers to pull up to $35,000 from their RRSPs to put towards the downpayment for their first home, without counting it as part of their taxable income.
In order to pull the amount up to $35,000 from an RRSP account tax-free, the money needs to have been in the RRSP account for a minimum of 90 days.
If you are thinking about buying your first home soon, meet with your bank to talk about RRSP contributions before you begin your search to ensure you can take full advantage.
You can find more information about using RRSP savings to purchase your first home here.
As always, if you have any questions, please never hesitate to reach out.
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Thank you for being here,
Alex Hughes* and Ricki-Lee Jewell, Victoria, BC Real Estate Agents
*Personal Real Estate Corporation
