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Empty Home Tax – Are You Exempted?

All registered residential homeowners in Canada (except in a few provinces) need to submit a property status declaration each tax year to highlight whether their property is occupied or will become subject to empty home tax.

Even if your home is not occupied by a tenant and you are living in the home, a declaration is necessary. The empty home Tax is calculated or determined based on the occupancy status declaration. This article will discuss all you need to know about this tax.

The process of declaring property status

Every year, the government authorities designate a date for submitting the property status declaration. If you fail to give a declaration within the due date, you will be required to pay a late fine. Failure to pay the late penalty can even adversely affect your credit rating.

In case you face a disputed by-law notice, it is recommended to wait for two business days prior to submitting a late declaration.

  • Generally, the property declaration requires 5 minutes for successful submission.
  • For each property, a single declaration is enough. For example, if you go on a property with your spouse or parents declaration by a single registered owner is adequate.
  • Failure to declare property status within the deadline will render your home empty, and you will meet to pay a 3% empty home tax. Additionally, you will face a penalty of $250.

Under any circumstance, if you are unable to make the declaration, you can permit someone else to submit the status declaration on your behalf.

Information required for declaring property status

To declare the property status, you will require:

  • The unique designated folio number and access code are generally mentioned on property tax notices.
  • Additional details include tenant names, permit numbers, property type, court order details, etc.
  • After the submission of status declarations, an audit process is carried out by relevant authorities following the best practices underlined by the local and federal tax regulations. A false declaration can attract a $10000 penalty each day for continuing offenses and additional tax payments.

Applicable exemptions and empty home tax scenarios

Consider the following definitions and scenarios to understand whether or not you’re exempted from paying the empty home tax.

Principal residence

A principal residence can be defined as the residential address where you usually reside and conduct your regular affairs. You will receive your regular emails, pay your utility bills and file your taxes at your primary or principal residence.

According to the vacancy tax regulation, a registered owner can have one single principal residence in the country.

You can get empty house tax exemptions under the following circumstances:

  • Your principal property was utilized by you or the registered owner (spouse or parent) as a principal residential property for at least six months of the tax year.
  • Your principal presidential structure was used as the primary residence by your friend, relative or any other permitted occupant during a period of 6 months or more.

The acceptable evidence documentation includes:

  • Vehicle insurance and registration
  • Government-issued personal identification documents such as driving license, BCID card, etc.
  • Income tax returns documentation
  • Utility bills such as water and energy bills
  • Employment contracts and pay slips
  • Homeowner’s insurance certificate

Additionally, spouses can file for two different principle residences for Empty Home Taxes with relevant proof of occupying the properties.

Second home

The residential structure can be defined as a second home if it is occasionally used or occupied by a family member or friend or held as a part of the investment.

A second home residential property is exempted from empty home taxes if it is not the principal residence of the registered owner, but it is used as a principal or primary residence by a friend or family member for a minimum of 6 months during a particular tax year.

You can also receive tax and exemptions if your principal residence is situated in a different province. But you occupied your second home due to full-time employment in that particular province.

However, your principal residence will be subject to empty tax if left unoccupied.

Remodeling or under construction

Your property (primary, secondary, or tertiary)will be exempted from empty home tax if it is undergoing significant renovation, re-development, or construction that makes it unsuitable for residing.

In such cases, when your property is vacant for more than six months, you will need to have:

  • Building permits issued within a stipulated timeline
  • Renovation or remodeling work is diligently executed and approved by a Chief Building Officer.

Heritage preservation

  • You won’t need to pay empty house tax if your property is designated as heritage property by relevant authorities following legal guidelines.
  • Additionally, you can enjoy tax exemptions if your property has a heritage alteration permit application for conserving the precious structure within a stipulated timeline of the reference year.

Death of the registered property owner

A property unoccupied for more than six months can be exempted from Empty House Tax in case of death of the registered owner during the ongoing or previous tax year.

The death certificate of the registered owner is the only acceptable evidence required during the property declaration status.

Medical treatment of the registered owner

You don’t need to pay Empty Home Tax if your property was empty for more than six months due to ongoing medical treatment of either of the following individuals in a hospital or rehabilitation center:

  • Registered owner
  • Legal tenant
  • Permitted occupant

The documentation required for evidence includes:

  • Principal residence proof dated before entering medical care.
  • Treatment facility contact information
  • Letter from the treatment facility confirming the ongoing medical or supportive care.

Property undergoing ownership transfer

You’re exempted from paying empty home taxes if you have transferred the legal ownership during the particular tax year. In such cases, a new Land Title Number is generated and issued to the new registered owner.

Court order

A court order preventing occupancy for six months or more will lead to exemption of empty house tax. You will be qualified for an exemption if a property:

  • Has an active court order.
  • Undergoing legal proceedings
  • Has a government order preventing occupancy

A copy of the court order or government order is necessary for evidence documentation.

Conclusion

Understanding exemption scenarios can be a tricky affair.

Therefore, you must opt for expert consultation while declaring the property occupancy status.