Starting in January, profits from sales of houses occupied for less than a year will be 100% taxable as income—barring certain exceptions, like death or work relocation.
- The change aims to stop house flippers from abusing tax exemptions that apply to the financial gains from the rise in the value of a primary residence.
Driving the news: Even before the law is enacted, the Canda Revenue Agency (CRA) is taking action, bringing cases of perceived missteps by house flippers to court.
- The success of these types of trials has been mixed, but the most recent rulingon such a case mostly went in the favour of the CRA.
Why it matters: Increasing taxes on a practice in which the only goal, really, is increasing the value of a home is one of the ways the government is trying to cool excessive price growth in the Canadian housing market.
- While prices have trended down in a big way this year, the national average home price in October was still ~19% higher than the average price pre-pandemic.
- Similar to the incoming foreign buyer ban, this law targets those with deep pockets who are trying to make an extra buck to the detriment of housing affordability goals.
Yes, but: There are concerns that the bill won’t do much to dissuade house flippers as they’ll factor the extra tax into their budgets and increase the price they list a home for accordingly.