Beeewaaaare the Tax Man!

As adults, most will agree there in nothing scarier than taxes, especially when they’re unexpected.  When Buying, Selling or even moving from one property you own to another, there are tax considerations.  A discussion with a professional accountant is recommended.  To help with that discussion, here are a few thoughts/questions to consider.

What is the Difference between a Primary Residence and a Personal Residence?  You can have more than one property for personal use but you can only have one Primary Residence.  Usually a Primary Residence can be sold without paying income tax.  A secondary residence may be subject to capital gains, such as a cottage.

What Happens if I Don’t Sell My Previous Residence Right Away?  Sometimes a family moves from their first home into their second home but keep the first home as an investment property.  In these cases, you are strongly advised to talk to your accountant.  If you decide to sell in the future, you may find yourself in the position of having to pay capital gains from the date of original purchase.  Ideally, you want your accountant to have records stating the value of the home when you move out so that you only actually pay capital gains from the time the property changes from a primary residence to an investment property.

What happens if the Seller a Foreign Owner?  The government may require the buyer to withhold monies to account for income tax unless documentation is provided.  The amounts can be significant and the buyer may be left with the bill.  Before you close privately or through a Realtor, have your lawyer confirm the status of the seller!

Is there H.S.T on the purchase or sale of my home?  There is no H.S.T on the Re-Sale of a home but there is on a new home purchase.  Most builders include H.S.T in the purchase price and ask that you sign over any government rebates to them but you should confirm that is the case when buying new.  Also, while there is no H.S.T. on the purchase of a re-sale home itself, you do need to pay H.S.T on services such as legal fees, home inspections, upgrades, real estate fees etc.  Later, if you check the land registry, you will notice that the price of the home recorded is lower than what you paid.  The purchase price less taxes is recorded, so the lower amount represents what you actually paid and the difference was the tax component.

The above is not intended to substitute or supersede advice from an accounting professional.  Please seek professional advice before making any large purchase as the specifics of your situation may change the above.  As always, if you have any Real Estate Questions we are here to help.

If you are looking to Buy, Lease or Sell From the Toronto West End up through Vaughan, Aurora Newmarket, East Gwillimbury, Keswick, Bradford, West Gwillimbury, Bond Head, Innisfil we can help.  If you need someone you trust outside our area, we have partners throughout southern Ontario and would be happy to connect with a local professional.  Call Toll Free 1-855-737-8383 any time or send an email to StevenSilvaTeam@gmail.com