Are you a City of Toronto homeowner?
If so, you would have received a yellow letter from the City asking you to submit a declaration form by Feb 2, 2023 about the occupancy status of your residential homes in Toronto in 2022.
The purpose of this Toronto Vacant Home Tax is to “increase the supply of housing by discouraging owners from leaving their residential properties unoccupied”. For homeowners who leave their houses vacant for more than 6 months during the previous year and do not meet the definition of any of the exemptions, you’ll be required to pay the Vacant Home Tax.
This Vacant Home Tax is calculated as: 1% of Current Value Assessment.
If your house is worth $1,000,000, this vacant home tax can be $10,000. Annually!
You don’t have to pay this Vacant Home Tax (VHT) if you meet one of the following criteria:
- You use the property as your principal residence – keep in mind that you can only have one principal residence. It is a property where you reside and conduct your daily affairs, receive mail and pay bills.
- A permitted occupant is occupying the property as his/her principal residence – this permitted occupant can be a family member and a friend of registered owner
- Property is occupied by tenants who has a written tenancy agreement for a term of at least 30 days and the property must be occupied by one or more tenants for more than 6 months throughout the year. If you are using your property for short-term rental less than 30 days, those do not count.
- Vacant with an eligible exemption listed below:
Eligible Exemptions – but you still have filing obligation!
- Death of a registered owner
If the registered owner passed away during the previous year, and the property was vacant for six months as a result, the property would still be exempted from the vacant home tax mentioned above.
However, the estate would then have to provide a copy of the death certificate to the City of Toronto as a result.
- Repairs or renovations
If your property is vacant as a result of undergoing repairs or renovations, you might meet this eligible exemption if all of the conditions below are met:
- The property cannot be occupied for normal use
- There’re necessary permits issued for repairs or renovations
- City’s Chief Building Official agrees that the work done are being actively carried out without unnecessary delay
If you are trying to get exempted from repairs or renovations, you must provide a description of your renovation and a copy of the building permits issued to substantiate your claim.
- Principal resident is in care
If the principal resident of your property is living in a long-term care for up to 6 months during the year, you can get exempted from this Toronto VHT.
You’ll have to provide a signed letter from the health care facility on their letterhead as proof.
- Transfer of legal ownership
If you purchased your property 100% ownership from an unrelated individual or corporation and assuming that you left your property vacant for over 6 months, you can qualify for VHT exemption. A copy of land transfer deed is required as proof.
- Occupancy for full-time employment
If you are required to live in a home in Toronto for employment purpose for a total of at least 6 months and that home is NOT your primary residence and your primary residence is located outside of GTA, you can still get exempted from VHT.
You’re required to provide proof of residency outside of GTA and a signed letter from your employer on company letterhead or your employment contract.
- Court order
If you have a court order preventing you from occupying the property for more than 6 months of the year, simply provide a copy of the court order and you’ll get exempted from paying this VHT.
Remember, even if you qualify for one of the exemptions listed above, you would STILL need to submit your declaration on an annual basis. You’re just not required to pay for VHT.
What if you just miss the deadline for submitting your declaration?
You can always submit a late declaration with a fine of $250 to $10,000.
If you don’t submit any declaration at all, your property can be deemed vacant. When it is deemed vacant, your property will be subject to the tax and you will be issued a Vacancy Tax Notice at 1% of the Current Value Assessment! 🤮
Hopefully, none of us is caught in this Toronto Vacant Home Tax regime.
Until next time, happy Canadian Real Estate Investing.
Cherry Chan, CPA, CA
Your Real Estate Accountant
