Do you have a vacant apartment or home? Whether you are out of the country traveling for work or have a second home that isn’t being used, you could be subject to Toronto’s Vacant Home Tax. This tax has been around since 2021; however, in early October, Toronto’s City Council voted to hike the Vacant Home Tax from 1% to 3%.
In this article, we’ll cover the details of the latest increase, who’s subject to the Vacant Home Tax, and what this means for homeowners going into the next few years.
The Latest Increase
The housing crisis in Toronto is reaching all-time highs, with vacancy rates at two-decade lows and average rent prices increasing 10% in recent years. In an effort to combat this housing crisis, Toronto officials implemented the Vacant Home Tax, which is now assessed at 3%.
This is an annual tax that is levied on residents based on the declaration of occupancy status on file with the city. Homes that are vacant for more than six months during the year are subject to the additional tax, which is payable in three equal installments on May 1, June 1, and July 4.
The tax is calculated based on the Current Value Assessment of your property. For example, if your property is assessed at $300,000, the tax Vacant Home Tax would be $9,000. This can quickly add up if you have a high-value property or multiple vacant homes.
Who is Subject to the Vacant Home Tax?
Not all homeowners are subject to the Vacant Home Tax. In fact, there are quite a few exceptions to the six-month occupancy rule, including:
- The property is your principal residence.
- The property is a principal residence for a tenant or occupant.
- The registered owner has passed away.
- The dwelling is under repair or renovation.
- The principal resident is hospitalized.
- You purchased the home during the tax year.
- You occupy the dwelling for full-time employment.
- There is a court-ordered vacancy.
If you believe you qualify for one of these exemptions, you will need to submit supporting documentation to the City of Toronto.
What This Means for Homeowners
Although the goal of the Vacant Home Tax is to raise capital for new buildings, it does create another layer of complexity for homeowners. In 2022, there were nearly 50,000 units that were deemed vacant, with 44,902 of those properties being declared vacant by city officials.
Homeowners now need to prioritize declaring their occupancy status on time to avoid a decision made on their behalf. Failure to declare or make a false declaration can result in fines of up to $10,000. The portal for the 2023 declaration is set to open in early November 2023.
Moreover, if you have properties sitting vacant, you should decide on the best course of action. Should you sell the property? How about taking on short-term renters to meet the six-month occupancy rule? The increase in the tax rate makes it more expensive to hold dwellings that don’t qualify for an exemption.
Summary
Are you subject to the Vacant Home Tax? If so, it’s important that you assess your options and the potential tax implications with a qualified expert, like NRK Accounting. We can help you go over the tax implications of selling a property, converting an empty dwelling into a rental property, and more. Reach out to schedule your free consultation today.
Sources
https://www.toronto.ca/services-payments/property-taxes-utilities/vacant-home-tax/