The BC government has officially passed its home flipping tax, set to take effect on January 1, 2025. Governed by the Residential Property (Short-Term Holding) Profit Tax Act, this tax targets residential properties held for less than 730 days, with the goal of curbing property speculation and promoting long-term housing stability. This initiative is part of BC’s broader “Homes for People” strategy and operates independently of the federal Residential Property Flipping Rule introduced in 2023.
The BC government recently passed its home flipping tax which was proposed earlier this year. Changes take effect on January 1, 2025. The tax, governed by the Residential Property (Short-Term Holding) Profit Tax Act, applies to residential properties held for less than 730 days. This initiative aims to discourage property speculation and promote long-term housing stability, aligning with the BC government’s broader “Homes for People” plan.
Key Changes
This new tax significantly impacts short-term sales. Clients aiming for quick profits from property flips will face a declining tax based on how long they hold their property. Properties sold within 365 days will be subject to a 20% tax on the profit, with the rate decreasing until the property is held for 730 days, after which the tax no longer applies. This shift means agents need to counsel clients carefully about holding strategies and tax exposure when considering short-term property sales.
For instance, a property purchased on January 1, 2025, and sold on October 31, 2026 (669 days later) will still be taxed under this rule. However, holding that same property until January 2, 2027, would exempt the sale, as the holding period exceeds 729 days.
It is important to note this tax is in addition to, and operates independently from, the Federal Residential Property Flipping Rule introduced in 2023.
Why Real Estate Professionals Should Be Aware of These Changes
This tax will impact a wide range of residential properties, including pre-sale contracts, and applies to both residents and non-residents. Real estate professionals must guide their clients through these changes, especially investors and speculators. Helping clients understand the implications can protect them from unexpected tax liabilities and ensure smoother transactions.
Real estate professionals should note that the tax affects properties purchased even before the 2025 start date if sold within 730 days. Clients who purchased a home in recent years and are planning to sell soon should be advised of the potential impacts. Real estate professionals should also educate clients on relevant exemptions, including cases of serious illness, death, or property transfers between related individuals, which may relieve some of the tax burdens.
Exemptions and Considerations
There are key exemptions,including for primary residences that may qualify for a deduction of up to $20,000 if owned and lived in for at least 365 consecutive days. Other exemptions include property sales between family members, Indigenous lands, and properties used exclusively for commercial purposes.
Comparison to the Federal Anti-Flipping Rule
Both regulations target short-term property flipping. However, unlike the federal rule, which applies to properties sold within 365 days and taxes profits as business income, the BC tax incentivizes longer holding periods by taxing properties sold before 730 days. The federal rule requires all profits from these sales to be classified as business income, regardless of personal or investment use, and are fully taxable without capital gains treatment or Principal Residence Exemption benefits.
The federal rule’s exemptions align with those of the BC tax, addressing life events like death, job relocation, or marriage breakdown. However, it imposes stricter guidelines on assignment sales, as it categorizes profits from the resale of pre-sale contracts within 365 days as business income and disregards losses from flipping under this rule.
