It’s official: 20% BC Home Flipping Tax will begin in 2025

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There is now an implementation date for the new BC Home Flipping Tax (HFT) formally announced in a previous budget cycle.

BC Minister of Finance Katrine Conroy announced today the new tax targeting home flipping activity and short-term speculation will officially begin on January 1, 2025, although it is noted that the tax will apply even if the property was purchased before the effective date.

As well, the finer details of the tax policy have now been revealed.

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This tax will apply on the sale of the residential property held by the owner for less than two years, with the seller being taxed up to 20% on their income from the sale. The tax rate will be 20% for properties sold within the first year of purchase. Over the second year (between 366 days to 730 days after purchase), the tax rate will gradually decline to 0%.

For the types of residential property this tax will apply, it includes not only a housing unit and properties zoned for residential use, but also the income from the assignment of contracts to purchase such properties. It will not apply to land or portions of land used for non-residential uses.

The provincial government is implementing the HFT as a measure of housing ownership affordability, in response to instances of properties changing hands multiple times over a short period, with owners sometimes holding onto their new acquisitions for merely months or even weeks. With each transaction from this speculative activity to earn a quick profit, the price of the home increases.

According to the provincial government, individuals who are more likely to sell a home within two years of purchase are more likely to be middle-aged and higher income, with women who sell a home within two years of purchase having, on average, a lower annual income than men who sell residential property within two years of purchase.

“After decades where the housing market served the interests of investors and speculators, even those who earn a decent income are finding it hard to afford a home. And that doesn’t sit well with our government,” said Conroy during her 2024 provincial budget speech today.

“To those who just want to make a quick buck by flipping homes, things are about to get more difficult. If a home is sold within two years of purchase, the profit will be taxed.”

There will be some exemptions to the HFT, including sellers who experienced a separation/divorce, death, disability/illness, relocation for work, involuntary job loss, change in household membership, personal safety, or insolvency. Other exemptions will also be provided to “those who add to the housing supply or engage in construction and real estate development.”

As well, individuals selling their primary residence within two years of purchase can exclude a maximum of $20,000 when calculating their taxable income.

“We all understand that life can change quickly, so there will be exceptions,” continued Conroy.

“But our government will always go after bad actors — whether they’re dealing in real estate, money laundering, organized crime, and more.”

The HFT is not forecast to be a major source of revenue, with $11 million estimated to be raised from the 2024/2025 fiscal year, and $43 million from each of the 2025/2026 and 2026/2026 fiscal years. All revenue generated will be directed towards funding the construction of new affordable housing, specifically for middle-income households.

The HFT is the provincial government’s second major interventionist policy, following the previous introduction of the provincial Speculation and Vacancy Tax.

In addition to the introduction of the HFT, the 2024 budget will provide new Property Transfer Tax exemptions to improve housing affordability for more first-time homebuyers.

The provincial government is forecasting the number of home sales will rebound in 2024, growing by 10% this year and 7% in 2025 from the fading effects of higher interest rates. It is also expected the Bank of Canada will begin a new cycle of gradually decreasing its policy interest rate starting later in 2024.

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