Sigh. It’s true. The changes announced by money minster Bill Morneau yesterday are unlikely to have much of a cooling effect on the market. More diddling around the edges. Another populist swipe at evil Chinese dudes. Some tightening up on qualifying for mortgage insurance. And a consultation process that’ll end up forcing banks to shoulder more of the risk now dumped entirely on taxpayers.
But that’s not the big news.
Buried in the announcement, the background paper, the technical paper and then deep into the CRA website are significant changes to how your Big Brother government will now be policing your family home. Under the guise of whacking foreign buyers – a tiny percentage of whom have been claiming the ‘principal residence’ exemption to avoid capital gains tax – the T2 gang have given the CRA the ability to whack you.
It’s a first in Canadian history. You’ll have to prove your home is your home. If you don’t, the money made on its appreciation will be fully taxable. Starting immediately, you must disclose to the CRA when you bought the property, and describe it. You’re required to reveal on your tax return what you sold it for. To avoid paying tax on your home’s sale proceeds, a Schedule must be filed with your taxes. If you sell the house and don’t report it, the CRA will have the right to assess a penalty of up to $8,000, plus tax you on the gain.
“Like terrorist attacks were used to compromise the privacy and independence of Canadian citizens,” says housing analyst Ross Kay, “it appears the Foreign Buyer myth will be used to compromise the privacy and independence of Canadian citizens even further. The suggestion that homeowners selling or buying their personal residence will be a required to report it on income tax forms sounds innocent, but it’s anything but. Twenty years from now as pressure is put on funding government pensions, having a record of net wealth tied up in the family home could place unexpected challenges upon those looking to retire.
“Anyone who believes today’s suggestion that Canadians are now required to give the government the details on selling the family home is not thinking. The government is using the illegal actions of NON-Canadians as an excuse to monitor Canadians’ retirement finances – not something this country should stand for.”
Whether or not this is a conspiracy to trace all individual wealth, it’s still a pain. More reporting. More complexity. More compliance and enforcement. And you can be sure of more taxation.
Here are the facts:
- Taxpayers must report the sale of the family home if you’re claiming an exemption from capital gains tax (in the past that exemption was automatic). ‘Basic information’ about the property will be required on the tax form – yet to be determined. If you don’t comply, no exemption.
- The CRA will have authority at assess you for capital gains tax on real estate that is not reported on the tax return for the year in which it is sold.
- Ottawa will work with provincial governments (which maintain land registry operations) to ensure that all residential real estate transactions are recorded and taxed as required.
- The tax return, starting next April, will require details on the date a property was acquired, the proceeds of disposition and a description of the property. To qualify for a capital gains tax exemption, you must complete and file a separate Schedule. The full exemption may not be granted, depending on the details provided.
- If you sell your home but forget to include this information on your return, the CRA will not allow the proceeds to be tax-free. In that case you must ask the CRA to amend the return. This amendment will be granted “in certain circumstances” but may also come with a penalty equal to the lesser of $8,000 or $100 per month from the sale date to the request date.
- If you have a suite in your home, then sell it, the selling price must be split and reported. Part of it will qualify to the tax exemption and part will not. In markets with elephantine gains in home prices, this could be quite the bombshell.
Well, that’s what we know so far. Doubtless, there will be more. After all, effective today your personal residence is a fully-taxable commodity unless you take specific steps to avoid it. By taking those steps, you’re also providing the government with information never previously gathered. Given that most people have most of their net worth in their real estate, the state’s about to take a giant nuzzle into their intimate financial lives.
Will Canadians accept this? Bill Morneau and his boss think so. After all, they wrapped it in anti-Chinese emotion.
How brilliant was that?
298 comments ↓
If you have a suite in your home, then sell it, the selling price must be split and reported. Part of it will qualify to the tax exemption and part will not. In markets with elephantine gains in home prices, this could be quite the bombshell.
Garth Would this only kick in if you have been deducting the corresponding interest proportional to the suite as is now?
Unknown at this time. — Garth
Interesting that a rental suite in your PR would be taxed proportionately….I always thought that the entire house is tax free. Is this a new tax law, or were people just ignoring it before?
This was my recent rental experience in the Couv.
Luckily for me I was only helping the one person who is more computer illiterate than me in this town ,my Father in-law.
It was getting late in September and he had been doing a slow coach reno in between tenants losing a months rent.
He is a senior with what looks to be the onset of Alzheimer’s so I try to help him out when I can.
He asked me if I could put an add online for him,so I went in the apartment around 2pm a couple Sunday’s ago and took 5 photos showing the newer features.
I took the add offline by 3pm as around ten interested parties had responded and one guy had already come around and handed over a damage deposit and informed another guy if something went pear shaped with the first guy then we would give him a call to see if he was still interested.
My FIL wanted to put it back on the market back the same price as before,but I said to him don’t you want to recoup your investment in your property ASAP and he nodded ,yes.
I slapped $200 a month on the price and judging by the response he could have easy got 300 more.
Renting in this town was already tough enough but rental pimps like Airbnb have made it super tough.
As for the island of Dr Moreau on today’s announcement, I tried to shove a paddle through the t.v and yelled at him to paddle faster.
He ignored me…
M42BC
I’d suggest that all realtors and lawyers dealing with house deals will have to take a look at their standard operating practices or form letters to make sure they give ample warning to their clients to report their sale to the CRA. It may not be a requirement of their professions, but sure would save their clients some heartburn.
This does seem to be a rather invasive (fishing expedition) measure. How long before annual disclosure of TFSA income or holdings is required when filing taxes?
The content of this post is completely missing from the mainstream media coverage of Bill More N’ Owe’s event today.
From what I’ve read the coverage has focused on:
– sticking it to the foreign buyers (ostensibly to ‘protect’ Canadians)
– Stress-testing mortgage applicants’ finances at the 5-year fixed rate, instead of testing their ability to fog a mirror.
See how good they are at politics? This went right between the legs of the MSM. — Garth
I don’t care if Big Brother is watching, if it helps catch the tax cheats out there. Let’s not kid ourselves that only a certain race or non-residents are out to dupe CRA. I’m sure there are many Canadian born and bred flippers out there who do the same. It’s about time we put a stop to this kind of tax evasion – whether done by Canadians or foreigners.
Did the OECD recommend those changes?
————————-
London mayor launches unprecedented inquiry into foreign property ownership (3 Oct 2016)
Probe Launched Into London’s ‘Safe Haven for Corrupt Money’ (3 Oct 2016)
” According to Transparency International, in 2015, over 40,000 properties in London are owned by foreign companies, and nine out of ten of these are based in offshore secrecy jurisdictions.”We need to understand the role that overseas money plays in London’s housing market & what action we can take to help Londoners find a home. — Mayor of London (@MayorofLondon) September 29, 2016
Ms. Davies told Sputnik”
“Our research found that 36,000 London properties are owned through secretive offshore companies with little scrutiny over the source of wealth in those transactions. The UK has been a prime location for stashing away illicitly gained wealth, as anti-money laundering systems are weak and sectors such as UK property represent a safe investment, as well as a place to hide corrupt money,”
Read more: https://sputniknews.com/europe/20160930/1045877518/london-uk-property-corruption.htLondon mayor launches unprecedented inquiry into foreign property ownership (3 Oct 2016)
Probe Launched Into London’s ‘Safe Haven for Corrupt Money’ (3 Oct 2016)
” According to Transparency International, in 2015, over 40,000 properties in London are owned by foreign companies, and nine out of ten of these are based in offshore secrecy jurisdictions.”We need to understand the role that overseas money plays in London’s housing market & what action we can take to help Londoners find a home. — Mayor of London (@MayorofLondon) September 29, 2016
Ms. Davies told Sputnik”
“Our research found that 36,000 London properties are owned through secretive offshore companies with little scrutiny over the source of wealth in those transactions. The UK has been a prime location for stashing away illicitly gained wealth, as anti-money laundering systems are weak and sectors such as UK property represent a safe investment, as well as a place to hide corrupt money,”
Read more: https://sputniknews.com/europe/20160930/1045877518/london-uk-property-corruption.html
————-
That is brilliant indeed.
Net Worth tax 101 coming.
Now they know what you have in RRSP, TFSA and now home worth…bank accounts next?
There has to be a master plan in the long run for the ability to tax us more, to sustain government and their pension plans. There is no way that the current workforce can fund the future requirements of the retired. The retired will have to help fund themselves. Or is it the “private sector retired” will have to fund the “defined government pension plans”?
We will all have to pay somehow and why not tax the only real wealth left that hasn’t been…personal homes? It’s is now the largest wealth & GDP factor.
I hope the media jumps on this one so the next election allows the abolishment of this practice. Or do we all just have to accept the inevitable? Government allows itself to focus on themselves to grow, not people and business to grow.
Getting tougher to want to invest and live in Canada? Sad reality of a country that has so much, but is managed so poorly.
How is this any different from any other financial disclosure required when seeking a tax exemption? What specifically is being compromised in providing the appropriate disclosure? If your primary residence is exempt from capital gains why is the submission of a schedule that confirms that you are seeking the exemption a breach of personal freedoms?
How about the AG suggesting that the deficit is much greater than advertised? Maybe that is worth discussing?
Unfortunately, I agree with you Garth. This won’t do much to cool the market. In fact, permanent residents will be much more impacted than foreign buyers. A terrible scheme. Please revisit your plan Morneau, another study or a few ASAP!
Unknown at this time. — Garth
Reply. If would be it proportional it would not matter and not be a bombshell. No Different than now. Thats the “deal” you get to write off interest , but pay capital gain on that portion.
If however it turns out that you rented the suite out did not deduct corresponding interest, and got slapped with capital gains then yes that would be a bombshell.
So, looks like they are going to whack those that are running small businesses out of their home too – if I am reading that correctly.
We get the government we deserve.
http://www.moneysense.ca/spend/real-estate/mortgages/no-more-discounts-for-fixed-rate-mortgage-borrowers/
No word on this Garth? This seems sure to have a big impact!
Garth:
I think that maybe the paranoia needs to be toned down a bit.
How is a house any different from any other asset class (i.e. stocks, bonds, options, futures) where you are required to report the purchase cost, sales proceeds, and purchase and sale dates to CRA?
Why do we always treat housing as some sort of “special” asset class on its own?
This is why, in B.C., people are complaining that the
“homeowner grant” (…a property tax break) only applies to houses under $1.35 million. Give me a break! You own an asset worth $1.35 million, and you want me to give you a tax break? Government would never do this on a $1.35 million stock portfolio – what makes houses so special?
If this reporting uncovers some transactions that, previously, would have never hit the radar screens at CRA, then good for Morneau for trying to stop the abuse. (Mind you, if the “astronaut dad” is smart, he’ll declare his wife [stationed here in Canada, and deeming herself “resident”] as the legal owner of the house).
Thank you, Garth! I spent the whole day trying to figure out how the announcement that people would no longer be allowed to declare that their principal residence was in a place where they had declared themselves to be non-resident made sense. Morneau didn’t even mention the change that they were actually making. I appreciate you doing the mentioning for him.
first
I think these provision have been in ITA long time ago:
(7) Subject to subsection 70(13), for the purposes of paragraphs 8(1)(j) and 8(1)(p), this section, section 20 and any regulations made for the purpose of paragraph 20(1)(a),
(a) where a taxpayer, having acquired property for the purpose of gaining or producing income, has begun at a later time to use it for some other purpose, the taxpayer shall be deemed to have disposed of it at that later time for proceeds of disposition equal to its fair market value at that time and to have reacquired it immediately thereafter at a cost equal to that fair market value;
(b) where a taxpayer, having acquired property for some other purpose, has begun at a later time to use it for the purpose of gaining or producing income, the taxpayer shall be deemed to have acquired it at that later time at a capital cost to the taxpayer equal to the lesser of…..
We already provide information on other financial translations from unregistered investment accounts to the CRA – is this really that different?
Having known numerous real estate agents and “property developers” who use the “primary residence” excuse to flip houses for profit, I quite like this idea. If flipping houses is your business, you should pay tax on it.
I think the part about houses with suites will be interesting to watch play out. Currently houses with suites are highly desirable in most urban cities. Not so much if it create a tax burden for the purchaser.
Very interesting…
Big whoop…a little more computer work at tax time. Yawn…
I actually agree with this, you are given the exemption so much like the capital gains exemption you still report it.
Plus I have seen this provision abused in the past as a junior accountant preparing tax returns.
Yup,
Then it starts…mostly tax free gains, but big
Brother will start with small tax bites on the gains and so on and so on!
And a beautiful carbon tax for driving those evil cars to your job so one can pay income taxes.
Better buy another sweater and keep the heat off too!
This country if effed up!!
Email Bill Morneau and cc T2. If everyone on Theo’s blog does, they will hear.
THESE CHANGES ARE NOT ENOUGH!! This is still just dancing around the issue rather than tackling it.
Furst!
This was inevitable I suppose; it’s too big of an untapped tax well to ignore for much longer.
Any implications when you are selling an estate as its Executor?
CRA has been corresponding with me at the same address for the last 32 years…what more proof do they need?
I have a friend that just sold last month their house for a nice profit. The house was their principle residence. Will they have to report it in the next tax filing next year?
This is good news. I bought at the very height, so I can claim a capital loss.
Double whammy with the carbon tax plan.
I hope everyone who voted liberal is happy today. Not much left to go after, or is there?
And just add some more $$$ and more risk to how much my landlord is subsidizing my lifestyle. I can’t imagine that the banks are going to let all this go and not start asking for HELOC holders to start cleaning them up.
Meh, this merely puts housing on par with other financial vehicles. Given the way some have been abusing the principal residence clause (local and non-locals alike) it is overdue. The federal government didn’t turn homes into a commodity, the market did. Whether its the reno and flip crowd, or developers churning out thousands of interchangeable commoditized one bedroom condos. However, I see your point about secondary suites. There’s not going to be any reason for owners to declare that income if they know it will be used against them later.
Welp looks like another Big Brother moment – govt seeks to have more control over your personal and financial life. Let me see – in what way can they REALLY maximize controlling your life? Easy – eliminate physical cash and you are helpless. Don’t think its possible? They are already discussing it at the likes of the IMF and central banks.
Rage against the machine
So now it’s like buying and selling equities. I’ve got to report all equity sales on my tax returns, the name of the company, when I purchased, how much volume purchased, proceeds of disposition etc. seems like the same idea really.
I don’t know. I’ll have to ponder it more but this seems fair especially since you can still avoid capital gains if you can prove what they are asking for.
“If you have a suite in your home, then sell it, the selling price must be split and reported. Part of it will qualify to the tax exemption and part will not. In markets with elephantine gains in home prices, this could be quite the bombshell.”
Wow, given the number of “Single Family Homes” in Vancouver with one or two suites, this is going to make things interesting for a lot of people, including my former landlords!
You missed the point, CMHC is passing the buck to banks, same as increasing downpayment to 20%. Smart move.
Not yet. — Garth
SALES TANK ACROSS GREATER VICTORIA
If you’ve been following my posts, you probably already know that sales of detached homes have fallen dramatically since spring.
That trend continued in September as sales of detached homes fell 49.2% below the level reached in April.
Last year’s April to September sales decline was only 22.8%
Those R/E agents who spread FOMO by saying April was the new normal for Victoria were a wee bit wrong.
Anyone who knows anything about real estate knows the following:
* A significant drop in sales is a sure sign that a housing market has already begun the correction process.
* The current number of listings is only a temporary thing.
* A period of unusually low listings (where fearful and greedy sellers hold of from listing) is almost always followed by a period of unusually high listings (even as sales continue to fall) which brings about a dramatic drop in house prices.
* All major housing bubbles (think Victoria) go through major economy-stomping price declines without the possibility of a soft landing.
Millions of people in thousands of cities in Japan, Ireland, the US, Spain, Greece, etc. bought when conditions in their cities were almost exactly the same as in Victoria now and were, of course, pummelled by the bubble-deflating market correction that always follows.
I’ve explained several times how Victoria’s housing market has been as bubbly over the past 3 years as Canada’s bubbliest markets (Toronto and Vancouver).
Victoria’s dramatic drop in sales since April has made it clear that the future direction of Victoria’s extremely overvalued market is down, way down.
Nothing going to happen as these are no changes. He is too chicken to put a tax line BC, here in Toronoto.
After all they want to collect more property taxes every year from over priced houses.
Bury them in debt intentionally and citizens will accept it gladly as long as they have a feeling their home value is more than last year, this game of musical chairs will go on until the music stops ….. and last men standing will be in tears..
“In the ruin of all collapsed booms is to be found the work of men who bought property at prices they knew perfectly well were fictitious, but who were willing to pay such prices simply because they knew that some still greater fool could be depended on to take the property off their hands and leave them with a profit.”
Chicago Tribune, April 1890
Knocking out the marginal buyer is the best part. They will remove the bottom end of the food chain and force over priced shacks to slash prices all down the chain. A correction/crash is desperately needed to flush out the greed. Boom then bust is all part of a market cycle.
Confusing. The Chinese dudes are not responsible for the run up in Vancouver and Toronto pricing. Yet in Vancouver there has been a significant drop in sales since all these taxes and loopholes came into effect. How can 5% of a market kill a market by 50+ percent? Or maybe its not a big deal.
what happens with all those transaction where sold/purchase price is hidden on closing documents? taxed on full amount i guess…
I give a slow clap for Bill. He knows what he is doing and he does it with a smile. It’s quite a brilliant move to observe there is a pile of potential taxation dollars tied up in real estate due to considerable price appreciation for most people who purchased years ago. Why not make it onerous to get the capital gains exemption. Well played sir, well played.
So we’re not going to talk about the new qualification rules for newbie CMHC insured mortgages? Ok then. At least they didn’t go completely nuclear and exempted renewing borrowers from qualifying under the new rule.
So to paraphrase, you are saying that I am a racist if I support a policy that discourages foreigners from manipulating Canada’s RE market to the exclusion of locals?
Hmm, now isn’t that interesting – if you don’t report the sale then you automatically owe tax on the gain. You might describe that as “negative reporting” rules. But didn’t the government climb all over Rogers about 15 years back for exactly the same thing – if you did not tell Rogers that you did not want a certain TV package, then they charged you for it. It was called “negative billing.”
I can hardly express how happy I am to have exited the residential real estate market before it turned into the great steaming pile of dung it is today. I’m invested as per Garth, comfortably renting in YVR.
I saw something bad coming way back in 2010. I went house hunting after selling my SFH. The market was just plain stupid everywhere I turned. I was expecting imminent collapse.
I was off by six years and incorrect about how it would play out. I thought RE would collapse under its own weight but I didn’t expect the Spanish Inquisition.
“Nobody expects the Spanish Inquisition!”
– Monty Python
The more government gets involved in any aspect of the economy the worse thing always become.
====================================
Ayn Rand:
“Money is the barometer of a society’s virtue. When you see that trading is done, not by consent, but by compulsion–when you see that in order to produce, you need to obtain permission from men who produce nothing–when you see that money is flowing to those who deal, not in goods, but in favors–when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you–when you see corruption being rewarded and honesty becoming a self-sacrifice–you may know that your society is doomed. Money is so noble a medium that does not compete with guns and it does not make terms with brutality. It will not permit a country to survive as half-property, half-loot”
“If you have a suite in your home, then sell it, the selling price must be split and reported.’
It is about time. It is almost enough to make me vote Liberal. Well, maybe I’m getting a little carried away with that.
Basement suites are businesses and need to be reporting income and paying taxes like any other business. Why should the whole property be free of capital gains when the is an unreported business in the basement?
Student properties are businesses too and should not be free of capital gains taxes because little Billy or Jane occupy one of the eight bedrooms rented out in “their” house.
Capital gains tax free status on an occupied property is for those who play by the rules, not for those who bend the rules.
All this to cool off a market when a measly few interest rate hikes ( which they WILL do eventually) would have done the trick…….
Govt and common sense ……diametrically opposed.
We’re complaining that we need to accurately report and disclose our home as the primary residence?
http://www.cbc.ca/news/business/ottawa-housing-tax-real-estate-1.3788725
Morneau believes the housing market is sound! Is he on crack? I guess the Economist, the IMF, and other agencies are all wrong?
so why is the media saying it only applies to foreign investors? (not that it made any sense).
do the media outlets not have investigative reporters anymore or do the agencies just report what they are told?
good grief-sickening if true.
With most houses in YVR having 1/3 or more of their floor space as a suite there are going to be a lot of people wishing they cashed out already. Not only do you get 20% less after prices have come down but you will now be taxed on 1/3 or more of the proceeds. Ouch.
Lets NOT let the gov bend us over……..What am I thinking
WE always DO!!
in 2019 when we punt T2 and the Lieberals can this and the Carbon Tax BS be reversed?
The sh.tstorm is starting.
The perfect time to move out.
BTW, just got my new monthly hydro bill (yes, SM is correct they are moving to monthly bills now).
I was away for most of September, on Consumption of 8 $ I have delivery charges of $ 28 and HST of $ 5.
Pretty brilliant I suspect. This is not a problem for average Canadians that actually live in their home.
I used to buy my Turbotax software at Walmart but lately I get it from Amazon, it’s cheaper. I’m sure they’ll have the form shipped with the $29 package.
“You’ll have to prove your home is your home. If you don’t, the money made on its appreciation will be fully taxable.”
It can’t be more fairer than this. Love it!
Being one of those lowly basement dwelling renters …actually infill duplex in Cow Town, the only capital gains I have to worry about is from our investments.Fun to sit back and laugh at the news!
#42 Not a big deal on 10.03.16 at 6:56 pm
….. How can 5% of a market kill a market by 50+ percent? Or maybe its not a big deal.
+++++++++++++++++++++++++++++++++++
Because people leveraging 20X are the ones fueling the market. And the banks are also leveraged 10X due to the fractional reserve system. This leaves a large number of people hugely exposed to a downturn. It’s all fun and games until someone loses their equity. This is why ALL markets drop far faster than they go up.
Smart people start the decline by locking in profits. The next smartest lock in smaller profits or settle for getting their money back. The other 90% (the greediest and most deluded of them all) ride the loss down. Ever has it been so.
#34 Doug t on 10.03.16 at 6:52 pm
Welp looks like another Big Brother moment – govt seeks to have more control over your personal and financial life. Let me see – in what way can they REALLY maximize controlling your life? Easy – eliminate physical cash and you are helpless. Don’t think its possible? They are already discussing it at the likes of the IMF and central banks.
Rage against the machine
////////
that’s ok, when cash is bitcon will fill the void… (i am laughing on my joke, not good sign…)
Rage against the machine
pay attention on 1min3sec
https://youtu.be/w211KOQ5BMI
Common now Garth,
You know the 3 measures are good even though 2 where hidden behind the foreigners fomo smoke.
Munreau also mentioned the cmhc deductible, that is -20% on the market by itself.
Today announcement are -15% to yvr market on top of the -17% drop on avg since march.
I state that -50% in yvr is not out of whack, it’s getting interesting
That’s how it works. Step at a time. More control less freedom. Remember though if you are smart enough to see the downward spiral you’ll be laughed at and called names.
#20 Kevin
Of course there is a provision in the law. They can not apply it though as neither prudent banks, real estate cartel or CRA required or reported on these transactions.
They did not do their job, it is not a loophole. They did not do they job as required by law.
They want it all.!!
Get rid of the personal residence exemption and start taxing those landed aristocrats like the rest of us!
So many questions. Everyone who owns should probably consult with an accountant now. Those who don’t own may want to postpone that RE purchase for a while. It sounds awfully complicated to comply.
Is it retro active or only applicable as of now?
Good thing i sold my house in 2015! Any chance these requirements can be required for past years?
Thanks for the heads up.
The only surprise is that none of this was implemented at the time when selling primary residence was declared to be free from capital gains.
Without these measures the entire system was unchecked, open for abuse from tax-collection enforcement perspective.
Justin Trudeau just signed his defeat in 3 years from now
wtf is all i have to say
Driver carries less than $50 cash and is fully naked.
But is she Hot??
Hmmm, I wonder if this partnership with the land registry will give the CRA an enhanced ability to track down those dodging claiming rental income.
Thoughts Garth?
Was tax evasion even a problem? I haven’t seen any evidence to suggest it was. And with house prices falling, and most likely to fall quite a bit further, owners may actually prefer to have capital treatment so they can have capital losses to claim against gains at a later date. Just like Trump is criticized for doing, perfectly legitimately and legally I might add.
Personally I view this announcement as being mostly optics, and very little to do with solving an actual problem.
In fact, if the principal residence exemption is something that has to be now explicitly applied for, rather than being automatically granted — could a taxpayer facing a loss on what ordinarily would be a principal residence simply decline to make an application for principal residence status, and claim the loss as a capital loss accordingly? Seems to me that this would actually end up costing the government money if homeowners are now given the discretion to either apply or decline the principal residence tax exemption.
“a tiny percentage of whom have been claiming the ‘principal residence’ exemption to avoid capital gains tax” – Garth
————————————————
Tiny makes it acceptable? I don’t think so. I don’t mind having to report on my income tax return if it closes a loophole.
Quoted from the CBC, would this not affect the lower end of the market quite substantially, or does the CBC have their numbers wrong?
“In addition to cracking down on tax leakage by foreign money, another change is that from now on, all insured mortgages must undergo a “stress test” that ensures a borrower’s ability to make their mortgage payments at a higher interest rate.
Effectively, that means borrowers will be tested against their ability to pay their mortgage if actual rates were as high as the big bank’s five-year posted mortgage rates, which the Bank of Canada says currently average 4.64 per cent.
That requirement was already in place for many borrowers, including so-called “high-ratio” mortgages for people with small down payments, and borrowers who borrowed money on terms of less than five years.
But from now on, any insured mortgages will be tested against that higher bar. Anyone who already has a mortgage, or who has already applied for mortgage insurance, is exempt from the new rules, which will formally kick in on Oct. 17.
That could have a big impact on buyers.
According to interest rate-comparing website RateHub, a hypothetical borrower with $100,000 in annual income and $40,000 to put down on a house today could qualify for a house worth $665,435 with a mortgage at 2.17 per cent, which three lenders are currently offering, according to the site.
But under the new rules, that same buyer could only qualify to buy a home for $505,762, or 24 per cent less than before the rules kick in. The lender is still willing to offer that lower rate, but the borrower would no longer be allowed to get it under the stricter rules, because his or her finances would be tested as though the mortgage rate is more than twice as high as it is in reality.”
How any buyers with 20% or more to put down buy CMHC insurance? — Garth
Socialism means the government sees you as a commodity.
Your earnings, your property, your freedom, your choice is subsumed, coerced and stolen for government.
This is just more of it. It shows the mentality of these people: tax, regulate and control everyone because they have the power to do it.
“To be GOVERNED is to be watched, inspected, spied upon, directed, law-driven, numbered, regulated, enrolled, indoctrinated, preached at, controlled,
checked, estimated, valued, censured, commanded, by creatures who have neither the right nor the wisdom nor the virtue to do so.
To be GOVERNED is to be at every operation, at every transaction noted, registered, counted, taxed, stamped, measured, numbered, assessed, licensed, authorized,
admonished, prevented, forbidden, reformed, corrected, punished. It is, under pretext of public utility, and in the name of the general interest, to be place under contribution, drilled, fleeced, exploited, monopolized, extorted from, squeezed, hoaxed, robbed; then, at the slightest resistance, the first word of complaint, to be repressed, fined, vilified, harassed, hunted down, abused, clubbed, disarmed, bound, choked,
imprisoned, judged, condemned, shot, deported, sacrificed, sold, betrayed; and to crown all, mocked, ridiculed, derided, outraged, dishonored.
That is government; that is its justice; that is its morality.”
This is all out there with the aliens, scary, Smoking Man may have a comment. On top of all this, T2 is implementing NEP 2, any suggestions?
RE: “Starting immediately, you must disclose to the CRA when you bought the property, and describe it. You’re required to reveal on your tax return what you sold it for. To avoid paying tax on your home’s sale proceeds, a Schedule must be filed with your taxes. If you sell the house and don’t report it, the CRA will have the right to assess a penalty of up to $8,000, plus tax you on the gain.”
You have no idea how much I like this. I mean, it has been a long while since a government did something, anything, that made me smile from ear to ear like a Cheshire cat. This is it. I am going to bed tonight smiling and I will likely wake up that way. For a long time.
While I pay tax after tax after tax, I keep watching houses in my neighbourhood get bought by real estate agents, who gut and renovate them, pretend to live in them for a year and then sell them. It is like living in a shopping mall where your neighbourhood is on sale. I have put up with renovation after renovation, done by people who have no intention of living here and are just running a house- resale business in a residential neighbourhood.
This is amazing. Thank you so much for this T2. You are my hero.
This will also likely reduce my income tax burden as all of these tax cheats who are skipping out on capital gains assessments will now be caught.
“You missed the point, CMHC is passing the buck to banks, same as increasing downpayment to 20%. Smart move.”
And the banks are in the process of telling the CMHC to shove “it” where the sun don’t shine. The banks will not tolerate any attempts of the CMHC to alter their legal obligation to pay 100% against 100% of the valid insurance claims filed against its subprime mortgage insurance. They will retaliate, primarily through a reduction of lending and/or an increase to the cost of lending. Which will almost certainly accelerate claims against the CMHC due to lower house prices thus induced.
I don’t see what the fuss is. So what if they’re making you report any sale of a primary residence on tax returns?
If you have nothing to hide it’s merely a slight inconvenience that might crop up a few times throughout your life
I think the part about houses with suites will be interesting to watch play out. Currently houses with suites are highly desirable in most urban cities. Not so much if it create a tax burden for the purchaser.
Whole of Canada ?
Should put a dent in the flipping. Good idea. Lots of cheaters out there probably.
I happen to think this is an incredibly good idea and I fully support a move towards becoming more and more like Scandinavian countries where personal financial and wealth info is a matter of public record. The right to privacy doesn’t involve the right to hide income and assets from the state. Noone should see you naked or listen in on your dinner conversation, but things subject to taxation need to be fully and comprehensively disclosed. It’s unacceptable that middle class chumps become CRA’s playmate while the rich hide assets and income and whenever they get caught, their lawyers negotiate a sweetheart deal.
I think the tide of public opinion is turning decisively against the hiding and hoarding of wealth. But you probably think the Panama guys were doing nothing wrong, right Garth?
The internet is still in the process of changing the world, and while I understand that old schoolers are afraid of a new paradigm, I’m not. Just like zillow and other portals have brought American real estate into the light, and Uber brought dirty taxi corruption into the light, so will many other things be brought forth one by one and judged by society.
Sunlight is a disinfectant. If wealth is a virtue, then surely there’s no objection to disclosure, think of it as a compliment :)
RE: “Twenty years from now as pressure is put on funding government pensions, having a record of net wealth tied up in the family home could place unexpected challenges upon those looking to retire.”
Except that there is already a record of what you paid for your home. It’s called the electronic land registry and it’s run by the Provincial Government. They know what your house is worth. They know you own it. They know what you paid for it, when you bought it, whether or not it has a mortgage. All of that is public knowledge. You can obtain that knowledge by going to any Provincial land registry office, paying a $10.00 fee and searching the title to any property in Ontario.
How much you paid for your house is not private information. It’s public. Always has been. Your entire land title registration is a public document, accessible to anyone. That includes all mortgage registrations and purchase and sale price
I’m ok with this. For honest people who follow the rules nothing has changed, other then a little extra paper work.
The current system leaves to much room for people to cheat the tax system if they want to take the chance.
When I sold my rental house, my accountant made me report the capital gain and I paid.
I hate when I hear of people simply ignoring the rule on their taxes and getting away with it because the government doesn’t have the ability, time or resources to catch them cheating.
The party is over.
How effective Liberal government can be was displayed in the billion Dollar gun registry debacle.
Now the Canadian home owner has to prove that he/she lives in his/her own home.
Who voted for these clowns?
When I sold a rental I paid Cap Gains base on MPAC
IE: the time I bought my new principal residence and
rented my old principal residence out till I sold it.
The appreciation from the rental period only is taxed.
Is that not what is to be done in the past?
Hey Garth, will they set up a separate anonymous tip line for reporting tax evaders? This would generate a high quality list of “Glengarry” leads, and help CRA corroborate the dodgy ones.
Hey Garth,
“Some tightening up on qualifying for mortgage insurance.”
It seems like you are downplaying a very significant change in mortgage qualification.
http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/house-prices-will-not-rise-forever-base-your-financial-decisions-accordingly/article32219135/
“This is all the more true when you consider just how tough the stress test is. The idea is to see if you can handle rates at levels that are much higher than they are today. The reference rate is called the Bank of Canada conventional five-year fixed posted mortgage rate, and it’s based on rates advertised by the Big Six banks. This rate now sits at 4.64 per cent, which compares to about 2.4 per cent for a nicely discounted five-year fixed rate in today’s market.
A lot of housing bulls have based their argument on a view that interest rates are low and not about to rise in a serious, sustained way because the economy’s too weak to stand it. But the more widely applicable stress test is like a back-door interest rate hike for some buyers.”
“It’s the same as if rates went up to 4.64 per cent overnight,” Mr. Larock said. “There is a danger that government might have overtightened.”
I think that the Real Estate market is about to find out what happens when you pull the bottom puzzle pieces out of Jenga.
Good luck to all.
I wonder what happens now if you own 4 prime residences.
That’s just wonderful… I’ve been audited 5 years in a row. One year cra asked for 2 years of taxes. They disallowed every claim and asked me to send back 70k. While going to tax court (at my expense) they audited me again. After winning in tax court I sent the judgement to Cra for the following years audit and they still disallowed my expenses. At what point can I sue Cra to recoup the money I’ve spent on accountants and lawyers plus harassment?
Maybe Trump’s not that bad after all.
Today, standing in line at the post office (shoppers drug mart). A lady wanted to put a hold on her mail.
Sure said the postal employee, address please.
The lady said it was apartment number —
at — — street, Ottawa On. postal code — —.
After punching in the postal code, the employee informed her, that that was a house, not an apartment building.yes she agreed, but it has 3 apartments.
One construction company in Vancouver that is going full steam ahead that I thought might have had a bit of a pause is Tavan construction.
They build luxury homes on Vancouvers Westside and have been purchasing knock downs for 4/5 million and building luxury homes and trying to sell them in the 10/15 million dollar range.
They cater to anyone with that sort of cash but the last few years the foreign buyer has been a successful hunting ground,so I thought the 15% tax might slow them down a bit and as they build spec houses will be in the Feds sights.
But I drove by one house that is 1/2 finished and a couple of blocks away they dropped another house and are digging out the basement.
Their version of a basement is 14 ft ceilings ,bar ,media room ,cigar room and games room.
Are they digging themselves into a hole?
Time will tell…
M42BC
My google-fu sucks: are there publicly available links to the papers with details?
This is it, the RE gravy train is stop at this station right now, no more further. Ppl bought in the peak will feel the pinch when they sell. What a dramatic change. Renters….. soon enough rent will come down as well. just be patient.
Bill has to learn to deliver this stuff without smirking.
so much for democratic process…get yer prying noses out of our business..bunch o’ trust fund babies who never had to make their way…no wonder people work for cash under the table..there’s much more money to recoup there…leave the taxpaying regular joe alone
re: #2 Chaddywack on 10.03.16 at 6:18 pm
Interesting that a rental suite in your PR would be taxed proportionately….I always thought that the entire house is tax free. Is this a new tax law, or were people just ignoring it before?
if this is the level of their awareness many homeowning Canadians are in for a rude awakening, and can also sassume many are not reporting the income from suites
@#52, no, but that does not stop them to try to make you believe in it. Canadians through real estate prices already proved how fool they are, so statement endorsing health of the same should not be seen as derogatory as you perceive it, especially when collective IQ is no more than room temperature.
Here is what the Vancouver RE Board sent out. I am also not sure why anyone with 20% down would buy gov’t backed mortgage insurance but apparently people do? The higher qualifying rate could have an effect on a lot of borrowers though – this may be a bigger deal than I first thought:
Federal government changes mortgage insurance rules
The federal government announced regulation changes for new government-backed insured mortgages today. Effective October 17, 2016, insured homebuyers will have to qualify at the posted five-year qualifying rate. Previously, only variable rate mortgages and mortgages with terms less than five years were subject to a higher qualifying rate.
The qualifying rate is updated weekly and available on the Bank of Canada website. The current rate is 4.64 per cent, about 200 basis points higher than the best bank offered rates.
To qualify for mortgage insurance, a homebuyer’s debt servicing ratio must be no higher than:
• Gross Debt Service – 39 per cent of household income, including mortgage payment, taxes, and heating costs.
• Total Debt Service – 44 per cent of household income, including mortgage payment, taxes, heating costs, and all other debt payments
These changes will apply to new mortgage insurance applications received on October 17, 2016 or later. Mortgage insurance applications received after October 2, 2016 and before October 17, 2016 are also not affected by the rule change, provided that the mortgage is funded by March 1, 2017. Homeowners with an existing insured mortgage or those renewing existing insured mortgages aren’t affected by this measure.
These changes also won’t apply to mortgage loans where:
• the lender made a legally binding commitment to make the loan;
• the borrower entered into a legally binding agreement for the property against which the loan is secured.
The federal government is also instituting new eligibility rules for low-ratio (higher than 20 per cent down payment) mortgages backed by government insurance. As of November 30, 2016, to be eligible for government insurance, new mortgages must meet the following requirements:
1. A loan whose purpose includes the purchase of a property or subsequent renewal of such a loan;
2. A maximum amortization length of 25 years;
3. A maximum purchase price below $1,000,000 when the loan is approved;
4. For variable-rate loans that allow fluctuations in the amortization period, loan payments that are recalculated at least once every five years to conform to the original amortization schedule;
5. A minimum credit score of 600 at the time the loan is approved;
6. A maximum Gross Debt Service ratio of 39 per cent and a maximum Total Debt Service ratio of 44 per cent at the time the loan is approved, calculated by applying the greater of the mortgage contract rate or the Bank of Canada conventional five-year fixed posted rate; and,
7. A property that will be owner-occupied.
These new criteria, in particular requiring a maximum purchase price below $1 million, will essentially make the majority of single family homes in Metro Vancouver ineligible for government issued insurance for low-ratio mortgages.
The government also announced measures to ensure that the exemption from capital gains tax on the sale of a principal residence is available only in appropriate cases.
(Thanks to the BC Real Estate Association’s Economics department for this analysis.)
Mortgage rates may be the last of our worries.
The State Department just announced they have suspended negotiations with Russians in Syria, which means they are moving to a more overt and open support of the Jihadist, destabilizing cause in Syria, this time, in the face of a nuclear armed Russia.
I think it’s going to be a cold winter. A nuclear winter.
Actually the CREA has all the bought/sold pricing information on us. As does our municipal (property tax) and provincial (MPAC) governments.
Reporting the capital gain, and then getting the exemption, simply makes sense, especially to prevent abuse?
Having trouble believing the number of sheeple who come to this pathetic site. Unlike you, I have been in government. Be careful what you wish for. — Garth
Those not declaring eligible capital gains on the sale of real estate are tax evaders and scofflaws. If a government tolerates this then trust in the legal and tax system breaks down. Sadly that trust relationship has broken down with rumors of scammers and gamers of the system winning big while all ordinary Canadians are left holding the bag. The government had to do something to restore faith in the tax system. Should be retroactive to 2008.
Sorry – now see the hyperlink you provided above – thank you.
So if I’m a foreign guy who bought in 1999 and sold tomorrow, would all my gains be taxable? Is this retro active so to speak?
I started reading this blog about the same time Garth had titanium added to his lower leg and have not missed a post since. I stumbled across this blog while google searching the gas bag called Canadian real estate. I was also baffled and quite perplexed at just how long it has actually gone on.
Fast foward to yesterday when I had my very own piece of titanium installed in my lower leg. Surprise surprise the government has come up with a bandaid for the mess they created via more taxes
I used to find way more time to add to the conversation here when I worked away. Now that I am home everyday I can rarely find the time.
Now with my 6 weeks of limited mobility I will be exercising remote log in and truly working from home
Fantastic pathetic blog Garth.
You sure did have a vision. We may not always agree, but always an interesting read
Care for a race? — Garth
“The basements of Brampton” will take on a new meaning after the changes to the rental suites inside a principle residence.
DELETED
#31 Static in Vancouver on 10.03.16 at 6:47 pm
This is good news. I bought at the very height, so I can claim a capital loss.
—
no. cra does not respect losses on principal res, because of the exemption
Could be interesting to see what happens to folks who sell and were renting a basement suite, for example. When they have to fill in the form on their tax return to report the capital gain. I’m sure some of them will be thinking oh crap, I didn’t declare the rental income all those years (this goes on all the time, tax cheats). This ought to be a major audit flag for past years and I’m certain CRA was thinking of this too.
Yes, get the folks renting their basement to subsidize the hydro, heat and taxes.
Plus putting up the grief of tenants in the house.
Just wait till the owners think it’s no longer worth the aggravation and shut the suites down.
Just watch the bidding wars on rentals sour and the under paid folks living down by the river in a van!
Great Policy from the Libs. More taxes = more money for programs and services! Bigger raise for the members of the Senate? Yes!
This again attacks the middle class. The rich will hire XYZ lawyers to LOOPHOLE this new program. The Middle class who don’t know better or can’t afford the lawyers will pay. It’s always the middle getting it from the top and the bottom isn’t it?
Is this new policy aimed to target guys who buy a house as their primary residence. Knock it down. Rebuild and sell it in a year tax free gains?
99 Lulu on 10.03.16 at 8:07 pm
This is it, the RE gravy train is stop at this station right now, no more further. Ppl bought in the peak will feel the pinch when they sell. What a dramatic change. Renters….. soon enough rent will come down as well. just be patient.
————————————————————-
RENTS WILL GO UP,
Gasp….
They want you to PROVE that you’re entitled to a tax exemption worth hundreds of thousands of dollars?? The outrage! What’s next, charity donation receipts?
(end sarcasm)
Let’s not kid ourselves. Assuming you are doing your taxes legally, the CRA already knows all about where you are living, what its worth, your bank accounts, your investments, your charities, etc. Filing an extra form in order to combat tax evasion just makes sense.
We as a society lost the right to say homes are sacred when we started trading them like penny stocks.
Will this have to be ratified by the House? What recourse do we have to defeat it as citizens?
According to this, most of CMHC’s portfolio is “low ratio” (more than 20% equity) – who knew? This will have an effect as harder to qualify even with 20% down. Banks want to insure the mortgages so they can sell them. 20% equity isn’t going to help much when prices fall 60%.
http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2012/02/changes-coming-due-to-cmhc-mortgage-insurance-limit.html
Mortgage default insurance is typically only “required” when someone with less than 20% equity gets a mortgage.
Despite that, almost three-quarters of CMHC’s outstanding mortgage insurance is low-ratio (i.e., 20% equity or more). That’s largely because banks have been buying portfolio insurance in gobs to insure against defaults on low-risk conventional mortgages.
Banks do that because, even though the risk is low, there is still risk. Investors who buy these mortgages like to know that the government is behind them, if borrowers default and the lender can’t pay up. Because of regulatory capital rules, bulk insurance also enables banks to lend more with the precious capital they have.
Re: #76 Mark on 10.03.16 at 7:29 pm
The CRA may or may not disallow capital losses on rental units. As well the write-offs may be disallowed but chances are they won’t be unless they were always cash flow negative.
Why do we always treat housing as some sort of “special” asset class on its own?
—
because its a home first, not an investment
RE: “To be governed” comments: In any country, the government is really just what stands between your desire to have stuff, be successful, enjoy your life and not be torn to shreds by the unruly hordes……..and the unruly hordes.
It is a bit of a give and take. Right now, slightly more take…..
may we live in interesting times….Well this opens pandora’s box. Garth, any other dogs who have been in this scenario: if a section of land from a primary residence is severed and sold is this considered taxable or tax exempt? I can’t seem to get a straight answer on this.
Onf51
HST may apply for the buyer and capital gains tax for the vendor. — Garth
I don’t care what the announcement or new rule is. It will work as new puncture on gasbag, good enough.
To bad you deleted my post, I was going to send you an family member with a significant amount to investthat you worked with you in Government, for a financial advisor.
She badlies needs help and I agree with everthing you blog about.
Oh well.
You were deleted for a racial reference. — Garth
Tread lightly. Perhaps that bank stress-test from few weeks ago wasn’t as rosy as reported either. What government in right mind would take down financial system for the sake of real estate. We all are in it, we set ourselves up for long agony, even those with no houses.
It’s time may have come?
https://www.facebook.com/albertafreedomparty/
#110 SWL on 10.03.16 at 8:20 pm
I started reading this blog about the same time Garth had titanium added to his lower leg and have not missed a post since. I stumbled across this blog while google searching the gas bag called Canadian real estate. I was also baffled and quite perplexed at just how long it has actually gone on.
Fast foward to yesterday when I had my very own piece of titanium installed in my lower leg. Surprise surprise the government has come up with a bandaid for the mess they created via more taxes
I used to find way more time to add to the conversation here when I worked away. Now that I am home everyday I can rarely find the time.
Now with my 6 weeks of limited mobility I will be exercising remote log in and truly working from home
Fantastic pathetic blog Garth.
You sure did have a vision. We may not always agree, but always an interesting read
Care for a race? — Garth
/////////////////////////
Geez,we’re a bunch of geriatrics.
I got my piece of metal taken out of my ankle last year as Mark promised me precious metals were in for a big year and I wanted to cash in.
I am having another procedure in 3 weeks and will be out of commission for 3 months.
Anyway SWL ,I hope your operation turns out to be a success and I hope the surgeon did not have their only good day of the month when they have a crack at mine.
After 16 years of suffering the race is on …will my ankle get fixed or will I be able to afford a house in Vancouver first.
I’ll settle for the ankle…
M42BC
Slime sucking propeller head communists.
Better not say that too loud some bright spark liberal might get the idea to attach a wire to the propeller to charge their smartphones and get a billion dollar grant from their cronies in Ottawa to acutely pretend to develop it. while creating useless Jobs.
If you have any sizable amount of loot you got to put it out of reach of the Communists. And if you think our teacher talking politicians are anything but that you are sadly nieve. Look at the adoring millennials, the love fest they have for pretty boy T2. The generation coming up behind are even more tree washed.
World war 3 has started, anyone following the rhetoric between Russia and The USA over Syria, This is getting serious. Why? Pipelines, access to markets. Here in good old Canada, we simply refuse to build them. A blade of grass that has an oil stain is more worthy of protection than the lively hood of hard working families in Alberta. Not to mention trickle down prosperity for all of us.
Liberalism has gone off the rails ideologically speaking. They what to now what your home sells for, for one reason only, they are figuring out ways to separate you from it.
Ecuador or Panama city is on my short list. My loot left Canada 8 months before T2 was elected as I predicted.
In six months, only an old pickup truck with a cracked windshield is what they will able to get from me. With 300k on it by then. Consider it my parting gift.
#78 very valid point, the increase shaves of 25% in purchasing power but that increases the higher you go up in price.
i ran the a few different scenarios and had similar results.
For the insider people on here, mortgage brokers, bankers etc.. what current percentage of borrowers have less then 20% down? those will be effected. is that percentage large enough to bring down the broader market? I dont know
BUT without first time buyers there are no move up buyers so if that percentage is greater then 20% then it will have an effect.
as for cap gains taxes, i have been saying that for a while, the govt is all about taxes, the rates will slowly increase as well. it most likely will not effect those who rent basements unless they do it legally as those that do cash deals dont get to claim rental incomes on tax returns, so the govt really has no way of enforcing any tax rules as the people that live in basements dont claim any benefits.
Care for a race? — Garth
Only if Smoking Man is your personal trainer
Sounds like the government went for an easy score from those who will be unloading investment properties as the market corrects. It doesn’t do much to cool off hormonal buyers, but it may deter some people from leveraging into a second, third or fourth property. It will be disappointing if this is all that comes of the “deep dive” into housing.
Flopper
Anyway SWL ,I hope your operation turns out to be a success
———-
Apparently some of the best reside right here in lotus land. Time will most certainly tell
Hi Garth (or any tax experts in the know),
How does it work if you are selling your home and only had a rental suite for a period of a couple of years?
Does that impair the tax free status of the principle residence? Or its there a rule for normal and continuous use as a rental?
Garth, based on the news today a typical $100,000 combined income just saw their purchasing max drop from 650k to 500k. That sounds quite large. You don’t seem to be talking about that affecting home sales?
You seem more concerned about CRA instead.
Why?
Because it is real, and effective today. We shall see what market impact other changes have. — Garth
So you have to report the capital gain on the home’s sale in order to claim the exemption? So… what’s the problem? Unless… of course… it’s NOT your principal residence.
Wonder if those shacks in Van can claim depreciation?
It was estimated 10% of purchases in the Vancouver area were foreign buyers. After the 15% tax to that 10% of buyers the sales volume collapsed along with a 20% decline in average prices.
Now we get this mortgage qualification change which is supposed to impact the same amount of buyers (7% to 10%).
When the market goes almost no bid after a 15% tax that impacts only 10%, then I think we expect similar havoc when another 10% of the market will qualify for 24% less of a mortgage. In Vancouver that 24% reduction prices you out.
111 Tony on 10.03.16 at 8:21 pm
“The basements of Brampton” will take on a new meaning after the changes to the rental suites inside a principle residence.
Which is why you take cash and give no receipts and do not try to deduct expenses.
Garth – you make it sound like today’s announcement was a bad thing.
This is a good tax, and I’m all for good taxes, even if I have to pay for them.
However, what’s not said by media or you…
if you expect housing prices to go down
this could be NET NEGATIVE.
speculators can now claim a capital loss!
No they cannot. — Garth
A barbarous relic no longer looks so barbarous. And buying a house in the US is now a genius move.
Just don’t sell either relic or house.
A lawyer that didn’t warn you about a potential $8000 CRA penalty and a huge fine for not reporting a RE transaction wouldn’t be much good as a lawyer.
—————————————————————
Bill Morneau had a few, ‘deer in the headlights” moments from questions asked by reporters today.
Does he know what “assignments” are? He could not answer how these will be taxed. I’m not sure that he knew what asignments were.
He also avoided answering how he will tax flippers who don’t submit an income tax form to the CRA as they are not Canadians.
I’m thinking that he will be looking over his responses to these scenarios with his staff and will be closing the door on any loopholes.
—————————————————————-
Get these reporters some ear buds to hear traslations from French or English. Do we have to hear it in English and then the same thing repeated in French or visa versa? There has to be a better way to present new policies to the media and Canadians.
Much of this is very far reaching. The tax changes are on balance well meaning but corrupt and broke governments in 3-5 years will have an incentive to find ways to screw growing numbers of innocent people as the game becomes to steal everything possible for any reason.
The changes that will impact the market involve the requirement that ALL insured mortgages be qualified at the bank of Canada’s rate and that all conventional mortgages to be part of portfolio insurance with ltv under 80 % be capped at 25 yr amort and qualified at the higher BofC rate
This will cut the supply of credit and raise the cost of many mortgages
It should trigger a correction and if Sousa comes out with his own tax look out
Come summer 2018 let’s talk about the unemployment rate and the GTA housing market
Wow I think they finally took some action that might well bite
http://www.fin.gc.ca/n16/data/16-117_2-eng.asp
#131 Smoking Man
Yep, I hear you!
Thanks for answer Garth…. should have got off my rear end last year and sold it. Oh well, price for living in a good country.
Onf51
Its sad what is happening to Canada.
Totally broke gov’ts now tracking house assets.
Spending and deficits and debt.
Carbon taxes up the ying-yang at federal and provincial levels.
Corporations leaving to do business elsewhere.
Why is it that Liberal and NDP governments have no clue how to manage the economy or run a country?
How come every time a Trudeau is in power the citizens of this country get massively screwed over?
Holly smokes
Spent the last Hour reading the posts from yesterday, full frontal head shot. I’m sort of blushing. Didn’t realize there was so much love out there. Thank you Dogs.
I had no Idea. My mission on greater fool was to piss off people, get them to rethink the matrix, the tree washing. Apparently, I’ve had some success. Garth what’s it been since the first post. 8 years.
At about noon today, emails started hitting my inbox from Bay street.
I’m in deep shit, let’s face it, no one will employee me even on a contract basis, a lunatic that sort of hates Devious, Bilderberg Bohemian Grove. Risk models in HR will bounce me to the door.
I REALLY give no shit, you guys always know I’m bit ahead of the curve.
I keep searching workoplis and Indeed, Key Word Search. = Phd in Herdonomics.
Pulling up zeros….. They just want economists, same school, same outcome, they all missed 2008. That was a good year for me.
Getting a feeling that Garth, a master wordsmith, and I don’t say that lightly. the dude can write, wants me to join his club of writer doom.
I’ve come a long way. I thank you all.
The rest of the song here……
https://www.youtube.com/watch?v=04854XqcfCY
Not a T2 fan, but today’s announcements seem reasonable to me. Not a big deal to report selling your residence a few times per lifetime (if that)
So the first “proverbial Shoe” has drooped. if you are a speculator, flipper,or landlord, your ass is now taxable grass. make no mistake that basement apartment is going to be taxable and will be costly when you sell. i admit i am the first one to be against government intervention and more taxes. but it seems that our elected politicians are intent on tinkering with the free market,under the guise of what? enforcing tax compliance? catching Chinese dudes with suitcases of money? (they ,the t2 gang are actually doing a treaty with china to close the illegal pipeline of money movement ) and forfeiting our moral stance against
the chinese goverments trampling of rights in doing so
so we are dealing with a infringement of long standing rules (CRA) concerning what is or is not a capitol gain specifically related to real estate
history has clearly demonstrated that bigger government,more taxation rarely works or is favorable
to the average tax payer
this is a rushed band-aid approach watch out for the second shoe when it drops
#131 Smoking Man on 10.03.16 at 8:58 pm
Slime sucking propeller head communists.
Better not say that too loud some bright spark liberal might get the idea to attach a wire to the propeller to charge their smartphones and get a billion dollar grant from their cronies in Ottawa to acutely pretend to develop it. while creating useless Jobs.
If you have any sizable amount of loot you got to put it out of reach of the Communists. And if you think our teacher talking politicians are anything but that you are sadly nieve. Look at the adoring millennials, the love fest they have for pretty boy T2. The generation coming up behind are even more tree washed.
World war 3 has started, anyone following the rhetoric between Russia and The USA over Syria, This is getting serious. Why? Pipelines, access to markets. Here in good old Canada, we simply refuse to build them. A blade of grass that has an oil stain is more worthy of protection than the lively hood of hard working families in Alberta. Not to mention trickle down prosperity for all of us.
Liberalism has gone off the rails ideologically speaking. They what to now what your home sells for, for one reason only, they are figuring out ways to separate you from it.
Ecuador or Panama city is on my short list. My loot left Canada 8 months before T2 was elected as I predicted.
In six months, only an old pickup truck with a cracked windshield is what they will able to get from me. With 300k on it by then. Consider it my parting gift.
—
So leave already…. what ya waiting for!!….mrs smokey owns you jimmy boy… Ecuador yeah right.. last year it was bsoton
as a add on i am beginning to wounder if T2 wouldn’t be better described as “TRUMP 2” or TRUMP JR.
With this tightening, is it not almost a slam-dunk that the BoC will be in a position to lower their policy rate once again by the end of the year?
Seems that way.
Garth,
You actively avoid paying too much tax, according to the NYTs that makes you one of us ‘deplorables”. Glad to have you on board.
Jim
#152 Electric Universe on 10.03.16 at 10:11 pm
#131 Smoking Man on 10.03.16 at 8:58 pm
Slime sucking propeller head communists.
Better not say that too loud some bright spark liberal might get the idea to attach a wire to the propeller to charge their smartphones and get a billion dollar grant from their cronies in Ottawa to acutely pretend to develop it. while creating useless Jobs.
If you have any sizable amount of loot you got to put it out of reach of the Communists. And if you think our teacher talking politicians are anything but that you are sadly nieve. Look at the adoring millennials, the love fest they have for pretty boy T2. The generation coming up behind are even more tree washed.
World war 3 has started, anyone following the rhetoric between Russia and The USA over Syria, This is getting serious. Why? Pipelines, access to markets. Here in good old Canada, we simply refuse to build them. A blade of grass that has an oil stain is more worthy of protection than the lively hood of hard working families in Alberta. Not to mention trickle down prosperity for all of us.
Liberalism has gone off the rails ideologically speaking. They what to now what your home sells for, for one reason only, they are figuring out ways to separate you from it.
Ecuador or Panama city is on my short list. My loot left Canada 8 months before T2 was elected as I predicted.
In six months, only an old pickup truck with a cracked windshield is what they will able to get from me. With 300k on it by then. Consider it my parting gift.
—
So leave already…. what ya waiting for!!….mrs smokey owns you jimmy boy… Ecuador yeah right.. last year it was Boston
…..
The obstacle, and it’s Boston you illiterate heathen.
Number two kid, Getting married. Oxy addict, on a bridge. I played dad for a day and saved him. turned to the twelve steps and it worked. He’s helping others now. Cost me a shit load for his rehab, and his new certificate to help others. He’s a good kid now.
He’s got a wrist bracelet, brain aneurysm soon . Wife wants to stay close FAST GRANDKIDS.
Me I want Walmart flip flops year round sunshine. Wife is going to win like every other wife that steals a stupid man’s heart.
That is what real men are made of.,
Smoking Man
Pipelines, access to markets. Here in good old Canada, we simply refuse to build them. A blade of grass that has an oil stain is more worthy of protection than the lively hood of hard working families in Alberta.
—
You are getting really stupid, JD made you forget the future already.
Canada’s real wealth is water, which should be protected at any cost.
Ask the real Smoking Man – or any native for that matter.
https://www.youtube.com/watch?v=qQ7BrRDsFaM
#137 fleabitten monkey
I have a home and paid 550K in 2005. A few years later, we built a basement suite. The assessed house value on our property taxes was 800K. I use that as my base for capital gains.
Right now, our home is worth 1.6 million. Therefore appreciation is 800,000. For capital gains, the suite is 40% of the house. Therefore Capital gains would be 320K. We would be taxed on 50% of the gains = 160K, split equally between my husband and me. This is how our accountant has told us to deal with the suite/principal residence scenario if it were to happen in the next while
We woud also look at our investment portfolio and see what capital losses make sense to offset some of this sizeable capital gain
Then again, people are predicting a major market correction. Who knows what the correction will be….but this is what would happen for us if we sold our home in the near future under the new rules.
We have declared our rental income from day 1. I think those that haven’t declared their rental income will be having sleepless nights. Home owners who have suites pay additional property taxes. If CRA is able to cross reference with municipalities……
Testing out mortgage applicants’ finances against the 5-year fixed rate may or may not cool down the Toronto market, but I wonder if it’s going to goose the exurbs (such as St. Catharines, Niagara Falls, Cobourg, etc.)?
It’s already well known that at the present moment, in St. Catharines/Niagara Falls, that your offer is going to have to be over the asking price or you don’t stand a chance. This change in mortgage qualification would mean that people qualify for less mortgage and so have to go farther afield in order to afford the size of house they want.
What do you all think?!
Very interesting. As a landlord that fully reports and pays tax on all rental income, I’m certain there will be some landlord-squirming in the coming days as they learn about this. It would be hard to dodge rental reporting in Ontario, since there is the provincial tax credit for rent paid, which requires annual amount paid, address, and landlord’s name. Every tenant wants that tax credit, no?
As for the “new” qualifying/stress-testing measure at the posted rate, will it affect the banks? I have mortgages initiated in 2003, 2012, 2014 and 2015. Two at 5% down, 2 at 20% down, all 5 yr fixed, all with the same big red bank. Every single application was qualified on the POSTED 5 yr rate, NOT the term rate. The last one the term rate is almost 50% less than the posted rate we qualified on.
Income verification has also been thorough. Notices of assessments, T4s, leases proving rental income, etc. I’m fairly certain they cross-referenced the lease amounts with the monthly deposits to the rental chequing account.
I think this will likely hit the mortgage cos., not the banks. At least one bank has been doing its due diligence, as far as I can see.
#152 Electric Universe on 10.03.16 at 10:11 pm
Good Wives always win… Cat vs Dog.
Dogs are doomed, but happy wives always win, and what is wrong with that. I love cats too in a weird way.
THE SHEEPLE IN THIS COMMENTS SECTION TODAY MADE ME THINK AGAIN OF THIS GREAT QUOTE FROM MELVIN UDALL THAT SO BRILLIANTLY REFLECTS WHY WE HAVE THE GOVERNMENT WHICH WE DESERVE:
Carol Connelly: OK, we all have these terrible stories to get over, and you-…
Melvin Udall: It’s not true. Some of us have great stories, pretty stories that take place at lakes with boats and friends and noodle salad. Just no one in this car. But, a lot of people, that’s their story. Good times, noodle salad. What makes it so hard is not that you had it bad, but that you’re that pissed that so many others had it good
No biggie but I am disappointed that the reporting to the CRA only requires a form to be filled out. I wish they asked for an essay. Mine would be 10,000 words long and replete with photographs.
Here is a picture of my daughter in her grade 6 grad dress. She was going through her chubby phase. And this out of focus pic is of our Springer Spaniel puppy “Rex” on the day we brought it home. We paid $325K in 2004. Here are the before and after photos of our gutting of the 1959 bathroom just a few months ago. Note the Grohe fixtures. Next is the hole in the vinyl siding my son made with a puck. We sold it in 2017 for $625K. Etc.
Would be great fun.
September in Cowtown was a slump buster. 21 months of declining sales was brought to an end. It was not exactly the Habs from ’75 to ’79, but it was a decent run.
Fork in the yellow forest. Smoking man fingers it… government will go on an quest to deny full primary tax exemption. Snowbird? How many months out of your primary residence. Tax the gap? Check into a long term care facility? Will that then become your primary residence according to CRA? Buy a new house with a basement apartment you don’t rent? Prove it. Looking after Grandma at your house? Deduct x percent of gain upon sale? Crazy stuff. Registered sale price levels could be used to change what services you are cut off from: get creative – OHIP services and prescription …coverage for seniors, long term care costs, home care costs, therapy treatment for titanium implants, another hip joint replacement, any deduction that CRA targets, empty bedroom taxes on the old joint and the new joint, student loan denial, anything these buddies can sink their fangs into …. its limitless.
#149 Smoking Man on 10.03.16 at 9:59 pm
—————————–
Garth is an amazing writer. I’m still trying to figure out what drives him more, writing for the masses or helping the masses.
Would the reporting of the sale of your house to CRA apply to those who had sold this year prior to today?
Unclear, but unlikely. — Garth
Having trouble believing the number of sheeple who come to this pathetic site. Unlike you, I have been in government. Be careful what you wish for. — Garth
————————–
Honestly, warning that this is a potential future tax is a bit over the top don’t you think? If our government takes measures to prevent abuse, at minimal expense to Canadians, I’m all for it. And by the way, I do work for government and have a friend in morneaus office.
More government, more compliance, more bureaucracy, more public employees. No wonder you are in favour. — Garth
If you have not lived in your house one year before selling it, you’ll get dinged.
Pretty simple.
Of course the government will never discount the inflation from the taxes they want and will always tax the nominal values, which in turn amplifies actual taxes the longer you hold the asset.
Will Canadians accept this? Bill Morneau and his boss think so. After all, they wrapped it in anti-Chinese emotion.
How brilliant was that?
very brilliant. First off, it side stepped the issue that real estate in Canada is in danger. In Vancouver it’s collapsing. Second it implicitly reinforces the notion that real estate is on the rise. Third it doesn’t really do anything – the great mass of Canadians who own their homes don’t have to pay anything more. Garth is right they now have to report it but they don’t pay anything. Fourth, the measures are mildly popular.
#14 Maybe on 10.03.16 at 6:32 pm
So, looks like they are going to whack those that are running small businesses out of their home too – if I am reading that correctly.
————–
No one is whacking anyone.
It’s just time for people to pay their taxes as spelt out in the tax laws of Canada.
If you don’t like it, move to Monaco.
There is a lot of “Why the Conservative Party of Canada will not form government anytime soon” on display in this thread of comments.
That thought coming from a life long Progressive Conservative voter, volunteer and contributor.
Amateur observer here, but doesn’t this seem like an incentive for boomers not to list and downsize? I thought the problem (in Ontario, anyway,) was in great part lack of SFH inventory.
Cottage properties (second properties) had a start date (I think it was in the seventies) for when capital gains started to apply and accrue. So you had to know what the “fair market value” of what your property was worth at that time.
Wonder if the same thing will apply here. i.e. a start date where you would have to know the fair market value of your property today so that when you sell in a few years you (and CRA) will know what the gain was, and hence what exemption to apply. What a pain.
“a tiny percentage of whom have been claiming the ‘principal residence’ exemption to avoid capital gains tax”
Are you sure about this?
Lets factor in the fact that nobody (CRA, cities, the province) really knows how many Canadian snowbirds or foreigners are renting their home out during the winter, or island cottage/principle residence for cash, or doing the AirBnB thing and not declaring the income, nor adjusting their principle home capital gain to reflect the mixed use of their property. Its a very common practise out in wild wacky west coast BC.
Residential real estate is the only investible income producing asset in Canada where there is no independent third party audit trail unlike publicly traded shares. Cities and provinces by their own admission do not have a clue if a house is really a principle residence or in fact a rental, a AirBnB, a flophouse, a grow op, or some other base for legal or illegal activities.
Another common feature of living on the wild and wacky west coast of BC.
I think the level of abuse of the principle residence exception is much higher and CRA does not the resources to stay on top of it.
All the liberal voting morons who voted for this tax on a personal residence that has been paid for in after tax dollars must be kicking themselves right about now. How’s that hopey dopey sunny ways selfie thing doing for you btw? Good going you screw up lackeys. You get to pay double tax on a home you once thought you might own but now will give half your life savings to Junior to fund an attack on Mali.
I call it “Double-D”: Demographics and Democracy for the 1st world countries, which will be their inevitable ruin.
Thank you, Garth!
What you wrote today hasn’t appeared anywhere else.
In our (604) neighbourhood, laneway houses were the rage during the last couple of years. Homeowners loved them, builders loved them and the city greatly encouraged them. They even come with a different address from the main house.
Today, they are waking up. Any future gains would have to be split.
I foresaw this coming, more than a year ago. And I discussed this with a friend and he is a tax expert. He did not think that would come. This will be a shock to a lot of people.
And yes, this is an easy step towards wealth tax.
To #171 ponzius pilatus
“If you don’t like it, move to Monaco.”
I would like to follow up yours that comment and move you in time to medieval Europe or Stalinist Russia where you belong and where they can tax deleted out of you.
More government, more compliance, more bureaucracy, more public employees. No wonder you are in favour. — Garth
————-
Me thinks, no price is too high to ensure that equality and justice is afforded to all members of a democracy.
I guess they need the money !
http://www.wsj.com/articles/canadas-big-bet-on-stimulus-draws-global-attention-1475435258
I don’t see what the big deal is. If anything, it’s a great idea. Banks share your stock transactions with CRA, why should RE be exempt?
Irelevant. If you buy a condo with 20k down is cheaper then renting. Yet yougsters are not doing so. Why? No MONEY
—–
Overall garth is a born philozopher
“Ottawa also unveiled new measures aimed at portfolio insurance, a type of bulk insurance that banks use for mortgages with down payments of 20 per cent or more. Starting Nov. 30, the federal government will now require portfolio-insured mortgages to qualify under the same criteria used for the insurance taken out on homeowners with small down payments. Portfolio-insured mortgages will now be limited to a maximum amortization period of 25 years and a maximum purchase price of less than $1-million. It requires all portfolio-insured mortgages to be owner-occupied, prohibiting insurance on rental homes and investment properties.”
The above from Globe and mail is a big deal, Garth partisan protests notwithstanding.
#161 Smoking Man on 10.03.16 at 10:46 pm
#152 Electric Universe on 10.03.16 at 10:11 pm
Good Wives always win… Cat vs Dog.
Dogs are doomed, but happy wives always win, and what is wrong with that. I love cats too in a weird way.
——
You ain’t going anywhere.. Schlong branch is where the heart is….Good job gog let’s you rant!!! releases the inner SM
#155 Jim on 10.03.16 at 10:24 pm
Garth,
You actively avoid paying too much tax, according to the NYTs that makes you one of us ‘deplorables”. Glad to have you on board.
Jim
—
Schlong branch deplorables… would make a good reality show
I live in an area in Victoria called Broadmead. People are not allowed to have suites for rent. Your in-laws or kids can live in them but that is it….
We have a nanny suite and I called up the Saanich Council and said could I rent it out – the woman I spoke to said well you are not supposed to but we won’t say anything if you don’t – exact words….
Ok Garth I never ask questions but I have one now…. I just signed papers for separation and will be having the title of the house being changed (likely done by Nov)
Do I have to make the claim, or will she, or both of us? Is it considered a sale when it is part of a separation agreement or is it a rebalance of assets as set out in the agreement? We bought in 2007.
Please answer if I need to make my accountant aware.
Cheers and thanks for all you do.
Gold bricks in a safe deposit box in Singapore. At this rate it won’t sound half as crazy by the time I retire!! :)
Since the T2 government and other governments will work together to do this, then current income tax free WSIB, welfare and other social assistance, GIS, child tax benefit and other federal, provincial and city social programs and benefits can be deducted from the sale and or transfer to family members of their primary residence.
These are how capital gains tax rules and so should those getting by with government income tax free social income, benefits and programs can pay it back with those that have their biggest asset which is their primary residence.
Time will tell what impacts will be. However, it does seem responsible.My assessment is this will slow growth/markets including Vancouver and Toronto. May drive prices down too.
We see evidence in Vancouver already of a slow down.
If Toronto does not slow down, next move is by Wynne.
Since the Feds want to tax gains in RE now, I wonder if they will count a loss and deduct it off income lol. Unlikely.
#106 Having trouble believing the number of sheeple who come to this pathetic site-Garth.
Yes. Freedom is not free. I know History. Most people will and did not realize what they had until it is/was gone.
The result of ignorant brainwashed PC feminine societies.
However. I am and will be fine. I am a man.
Take the pic of GT and SM. They are men. You can see it.
Now, look around you and compare.
Freedom First
007
PHD/Freedomonics
Metaxa flat out gets it. The political spectrum is not a flat horizontal line from left to right. It is a circle and along that circle lefties and righties meet. An evening in a honky tonk in Lacombe, Alberta with me defending the left and he touting the right would go a long way to curing what ails this country. Until it spilled out into the parking lot. Then all bets are off.
>> More government, more compliance, more bureaucracy, more public employees. No wonder you are in favour. — Garth
Real estate is by far the biggest financial transaction an individual makes in their lifetime. I do not understand why are you so opposed to having to report it. I have friends and family that have been audited for pennies compared to these real estate sums. Perhaps is not about having more public employees but to rather focus on these transactions as opposed to spend time auditing peoples for $2 reported GIC gain, child care, business lunch or dentist claim.
Perhaps this is a generational thing. As a Millenial, I am quite used to dealing with most of my life online and in the public forum. We provide online bank details, and do most of our finances online, unlike our parents. Maybe that is why I don’t see the big deal here.
If the government can use this information to ensure that people are trying to pull anything, then I am fine with it. If they want to know that I made $200,000 profit on my principle residence since I bought it, so what? As long as no taxes are being applied to law abiding homeowners, what’s the big deal?
I would also support purchase and sale information being public in a Trulia like system.
I no longer trust my fellow ‘Canadian’ I guess. I want to know that we are all playing by the rules so that my children might have half a chance in this country instead of competing against people working loopholes, renting rooms, and flipping homes like stocks.
I guess like the Real Estate boards we cant trust ourselves to self-regulate. We are not the community-minded society we once were. Get used to a lot more hand holding …
“Ottawa has brought this country’s housing fantasy to an end”
“Thank god for some adult supervision in housing. We need it for all the people who are basing the biggest financial move of their lives on the idea that houses always go up in price.”
Ottawa now desperate to deflate the toxic bubble. Even the slimy shill (a.k.a. mortgage broker) interviewed for the article is obviously defecating bricks.
Canadian debt slaves are in for a horrific shock.
https://goo.gl/5P4ZVz
#61 Ex-Cowtown on 10.03.16 at 7:15 pm
#42 Not a big deal on 10.03.16 at 6:56 pm
….. How can 5% of a market kill a market by 50+ percent? Or maybe its not a big deal.
+++++++++++++++++++++++++++++++++++
Because people leveraging 20X are the ones fueling the market. And the banks are also leveraged 10X due to the fractional reserve system. This leaves a large number of people hugely exposed to a downturn. It’s all fun and games until someone loses their equity. This is why ALL markets drop far faster than they go up.
Smart people start the decline by locking in profits. The next smartest lock in smaller profits or settle for getting their money back. The other 90% (the greediest and most deluded of them all) ride the loss down. Ever has it been so.
Very good. Thank you .
Is the Canadian government planning for one’s health care costs in retirement (i.e. care home monthly rate, medical services premiums) to be determined – at least in part – by *assets* rather than income? To me, that’s where this is headed.
#166 Winterpeg on 10.03.16 at 10:58 pm
Would the reporting of the sale of your house to CRA apply to those who had sold this year prior to today?
Yes
2. What is changing about the reporting of the sale of a principal residence?
Starting with the 2016 tax year, individuals who sell their principal residence will have to report the sale on Schedule 3, Capital Gains of the T1 Income Tax and Benefit Return. Reporting will be required for sales that occur on or after January 1, 2016.
Source : http://www.cra-arc.gc.ca/gncy/bdgt/2016/qa11-eng.html
Bottoms # 106,
“Reporting the capital gain, and then getting the exemption, simply makes sense, especially to prevent abuse?”
“Having trouble believing the number of sheeple who come to this pathetic site. Unlike you, I have been in government. Be careful what you wish for. — Garth”
—————————————-
I have never agreed with you more, Garth.
The high % of comments mirroring this type of thinking are stunning….way too much trust.
#168 Ponzius Pilatus on 10.03.16 at 11:00 pm
If you have not lived in your house one year before selling it, you’ll get dinged.
Pretty simple.
I couldn’t find anywhere on the CRA website saying one year.
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/lns101-170/127/rsdnc/dspsng/menu-eng.html
Some advice to remember…….keep every single receipt you have for house maintenance or improvement. It will be an allowable add to your house cost base. Don’t trust T2, soon your principal residence will be subject to capital gains.
“How any buyers with 20% or more to put down buy CMHC insurance? — Garth”
From G&M:
“Ottawa also unveiled new measures aimed at portfolio insurance, a type of bulk insurance that banks use for mortgages with down payments of 20 per cent or more. Starting Nov. 30, the federal government will now require portfolio-insured mortgages to qualify under the same criteria used for the insurance taken out on homeowners with small down payments. Portfolio-insured mortgages will now be limited to a maximum amortization period of 25 years and a maximum purchase price of less than $1-million. It requires all portfolio-insured mortgages to be owner-occupied, prohibiting insurance on rental homes and investment properties.”
Are all the banks insuring their “over 20% down” mortgages with this portfolio insurance?
If this is the case this could be huge…in that now almost every buyer will qualify for 10-25% less.
Also, RE portfolio insurance…I read somewhere else that it is something the mortgagor never sees as the banks pay for it themselves and eat the cost.
Good move by the Government on tax cheats, foreign or domestic, but enforcement will suck all the way to Hades.
Voluntary disclosure for a Canadian on their tax form? They are TAX CHEATS TO BEGIN WITH, they will play roulette until caught and if caught, the fines are laughable vs. potential RE profit gains ($8,000 vs. $100’s of thousands in profit = a very small cost of doing business).
Foreigners will find a way to put their investments in the hands of Canadian citizens, pay them for their time and not pay a single cent in Canadian tax upon selling.
None of this will get caught by Land Registry unless you have one heck of a database query working on the behalf of and fully accessed by the CRA.
Here are the stats by CRA as of Sept. 12, 2016 (this after adding 50 extra income auditors, plus 35 other staff on the B.C. real estate “project” earlier in 2016):
“In 2015, the Agency doubled its level of effort focused on the BC real estate sector. For the period from April 2015 to June 2016, the CRA completed 2,592 income tax and GST/HST audits related to real estate in Ontario and British Columbia. During this time, the CRA also reviewed 10,537 rebate claims. Penalties amounting to $11.6M were levied against those that demonstrated gross negligence in failing to report their tax obligations correctly.”
To quote NDP housing critic David Eby:
“Revenue Canada adding only 50 auditors to deal with this issue? This is an issue of literally thousands of households in Metro Vancouver, 50 auditors is frankly a joke.”
Mr. Eby has it. And so will the enforcement become.
bsant54
The results of a BNN (yes Garth, I know you dislike them) informal poll that asks the question (after the Morneau announcement):
Is Ottawa doing enough to curb real estate speculation by foreign investors?
Results as of 6:08 AM – 3 Oct 2016 (312 votes):
24% Yes
76% No
Sample size > 30, in theory, ought to be statistically significant.
Canadians believe that Morneau has not gone far enough by a 3:1 margin.
Too bad BNN did not ask a question about Canadian tax cheats with “multiple” personal residences.
Clearly, Canadians dislike foreign tax cheats…imagine their vitriol for domestic, home grown, tax cheats.
What I would like to know is what the 76% think Ottawa should do to curb foreign tax cheats, over and above what Morneau has proposed, let alone the home brewed tax cheat?
bsant54
#93 Greaterfool Dead on 10.03.16 at 7:57 pm
I wonder what happens now if you own 4 prime residences.
———–
I know people who own 4 to 10 homes in Vancouver. Their gloating has backfired. They thought they could get away with declaring them all primary residences. LOL
Now we will see if CRA has the kahunas.
The primary residence tax laws were always there. Now the honour system is done with.
Looks like the multiple real estate owners on this blog are pissed. garth, were you expecting not to pay capital gains on your real estate?
#138 PocoLoco on 10.03.16 at 9:20 pm
So you have to report the capital gain on the home’s sale in order to claim the exemption? So… what’s the problem? Unless… of course… it’s NOT your principal residence.
——-
Some people here been breaking the law it seems.
You were deleted for a racial reference. — Garth
Your blog, your advertisment, $6,667.67 per word or minimum $20,000/year for deleting me.
Money you do not need.
It’s not about money. — Garth
With expansion of the money supply (at least 4+ trillion and counting), there will never be underlying real asset (wealth) to pay the interest.
This is just a holding movement for the present government for the next.
70% of canadians do not have retirement plans and this is just the of eating seed corn.
IMHO, System D will increase.
#99 Lulu
“Renters….. soon enough rent will come down as well. just be patient.”
—–
I asked how rents would be affected by a possible correction/crash the other day. Now this tax change has been implemented. I think this will have a minimal effect on the market.
But what is your rational for rent coming down? Connect the dots for me…
Right it’s all about compliance.
What happened to those Zika and Ebola scare stories. Right….
Both, designed as usual to limit our free travel. Discourage reproduction, and allow spraying of deadly chemicals which if I had to guess cause genderbending and reproductive issues.
Btw did you know according to (even controlled) Wikipedia abortion only is legal in First World countries? That message is clear in its meaning. My offspring are not wanted. Success ends with my generation.
“Will Canadians accept this? Bill Morneau and his boss think so. After all, they wrapped it in anti-Chinese emotion.
How brilliant was that?”
From the comments the the answer is, sadly, Yes!
#132….but how many mortgages are less than 20% down? ( he asked)
Hilariously naive question. In the thriving USA 33% of car loans are for more than the new car costs due to the underwater trade in!
Do a little interpolation Dude! 99.9% less than 20% down?
Capital ‘gains’ taxes are unfair as they do not account for inflation.
How is a house in a small town growing in value when in reality simply money/the measure are losing their value?
Same with deposits, interest of 0.1 % on depots is taxable while inflation is 2+%?
I understand that governments need money but getting it both through inflation and through taxing ‘capital’ gains is pure theft.
57 years ago I rode to Toronto.
The QEW crossed the Welland canal on the two lane Homer Bridge. All the way to Hamilton was farm land with traffic lights at the level crossings where the overpasses now are. On the lake shore beside the brand new Burlington Skyway, the cottages and whore houses were caked in black soot from the steel mills belching the byproduct of a new nation under construction. Then there was yet more farm land all the way to Ford Oakville.
427 was two lanes of dirt. Malton airport a low building maybe 500′ long at the foot of American Drive, planes had propellers and only flew about 500 miles away for the most part. There was no Gardiner Expressway, and the Royal York Hotel was the third tallest building on the skyline. There was nothing north of the new 4 lane 401, Rexdale was being built in the boonies.
Bramalee had not yet been invented by a certain
Englishman flying in, and looking out the plane window when landing saw vacant land to his astonishment!
In those days if you sailed to Niagara, on a clear day all you could see was sky and water when you were halfway there!
With the financial situation compounded with the new taxes needed for carbon “compensation” and real estate and more other reasons yet to come, I really think that if you take that same drive 59 years from now, all you will observe for change will be decay. Very obvious decay, but not much new.
How’s that for doom porn this morning?
#76 Mark on 10.03.16 at 7:29 pm
Was tax evasion even a problem? I haven’t seen any evidence to suggest it was.
__________________
Mark is looking for evidence before jumping to conclusions? Excellent sir, I like it.
I don’t have specific evidence I wish to share but I can tell you that there are house flippers in the YYZ and I’m sure they don’t report what they are doing as income. It’s tough to find them for revenue canada and I think this is a very good step as a lot of income is being missed here.
Thanks, Garth. I read a few articles on this yesterday and thought, “…this seems more aimed at Canadians than foreigners.” Glad to see someone knowledgeable noticed and could explain this.
That said, if they really are cracking down on abuse of the principal residence exemption, I’m in favour of that. Less so if it’s information collection overreach, but I guess we’ll have to see what exactly is required.
I have to tell the government (if audited) exactly which charities I give money to in order to get that tax deduction. Saying what I sold a house for feels like less of an intrusion.
Small businesses run from a home need to be taxed too.
In (West) Hamilton, we have a pre-natal diagnostic imaging business, a BNB “hotel” and a massage
‘spa” all run as home businesses right in the middle of a SFH area.
I guess we should be thankful that they aren’t running an opium den or brothel for the McMaster students. Anything goes as a home business in Hamilton!
Garth meeting SM…. guess all the conspiracy that they were alter ego is debunk.
Was a warm fuzzy feeling knowing two great minds meet.
Now these silly liberals doing this crap to ruin my mood… atleast they will legalize the mj? Haha. Ya right they will regulate it so hard you might aswell turn to harder stuff.
Note to Conservatives: You can still dislike T2 and admit this is a good move. Come on, you can do it. Give it a try….the world is shades of grey, not everything he does is wrong.
Restrictions on tds/gds are more significant. A lot of borrowers wouldn’t have qualified for their new loans over the last year. Brokers freaking out.
http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2016/10/is-this-the-last-nail-in-the-coffin.html
The bubble has just burst. Expect negative year over year mortgage growth next year. Goodbye low mortgage rates. Amazing mainstream media focused more on other restrictions.
Smoking Man and Garth to go on a Canadian Tour to educate Canadians about what’s coming in Real Estate? Lewanza and Rowat to drive the bus, order lunch etc..imagine the notoriety and public awareness! Coming to a roadshow near you in Spring 2017? One can only dream but DREAM BIG!
…”The BEPS project aims to combat the artificial shifting of profits of multinational groups to low tax jurisdictions and the exploitation
of mismatches between different tax systems, so that little or no tax is paid. In October 2015, the OECD published a report recommending the introduction of a general interest limitation rule that restricts deductions for interest by reference to a fixed ratio of a company’s EBITDA”
I have to wonder why I am not seeing such a “cut to the bone” analysis from the media, or hearing this from, say, Rona Ambrose?
Garth, you’ll ban me from your site, but I think you should re-enter politics. We need people in leadership positions who can not only counter such abuse but can actually see it is happening!
#217 Sheane Wallace
“I understand that governments need money but getting it both through inflation and through taxing ‘capital’ gains is pure theft.”
——————————————————————–
That is because our government is tantamount to a criminal organization (aka thieves) that steal from us.
Mafia
-noun
1. A group prominent in and suspected of controlling some organization, institution, etc., by means of criminal activity.
2. A hierarchically structured organization engaged in extortion, theft, racketeering, trafficking, and other criminal activities.
The Mafia is financed by stealing; for example, trucks are hijacked, their contents sold to fences and the proceeds shared by the hierarchy. Government, likewise, obtains all its revenues at every level (local, state and federal) by confiscating money under threat of violence. To call it “tax” and to pretend that is the “price paid for a civilized society” is a ruse. The enforced removal of property from its owners is theft and nothing else. The fact that government is never financed voluntarily, without threat of violence, is positive proof that nobody wants it; or rather, nobody who doesn’t hope to share in the loot, as part of the “hierarchy.”
So, yeah, capital gains tax is theft. We are the victims of ongoing crime. Justin Trudeau is the new boss.
The exemption on capital gains for the main residence is essential to maintain mobility.
But at the same time since that exemption has been so abused by flippers and speculators it was to be expected at some point that the government would require to declare the sales.
IMO there is not much wrong with that, the purpose of the exemption is to protect mobility, not to add a source of tax free income.
But at this point I don’t think it will have much cooling effect on the markets.
The measures taken by T2 and associates are not necessarily bad, they’re just too little and too late.
I understand that governments need money but getting it both through inflation and through taxing ‘capital’ gains is pure theft. #217 Sheane Wallace
I don’t disagree, but how is it fair to totally exempt house flipping but not other assets?
Of the 4 countries the old girl and I have owned property, Canada is the only one that doesn’t do this already. We are literally giving millions of dollars in tax breaks with ZERO accountability. You really think those flippers are paying tax on their flips? Nope. NEVER. You think the Chinese are paying tax on their flips? Nope. You think that student in van paid tax on his flips?Nope.
Now they will have to declare things might calm down a little.
My wife – a Chinese national until a few years ago – is furious that we are so naive and make it so easy to get ripped off. In her words: “everyone can steal from Canada, it’s so easy, are you blind?”
If only a part of your home qualifies as your principal residence and you used the other part to earn or produce income, you may have to split the selling price and the adjusted cost base between the part you used for your principal residence and the part you used for other purposes (for example, rental or business). You can do this by using square metres or the number of rooms, as long as the split is reasonable.
Instructions will be provided in the guide T4037, Capital Gains 2016, on how to report the sale of your principal residence in this situation. -CRA Website
That would be a great surprise for many who not only have basement suites (which doesn’t really sound fair, as the gov’t has been getting tax money from the rental income all along), but also from many who have a home office space, or who use part of their family home to rent storage space for their business or corporation to store supplies and such.
The tax effect this is going to have on average Joe Canadians trying to run their own business is going to add up.
Why is this a problem ?
The government is just asking you to substantiate that your tax exemption is legitimate. They do that with probably EVERY OTHER exemption I think.
I personally know several “white as ivory” Canadian born English is their first language flippers who have claimed the exemption when they were not entitled to.
It’s about time.
Current average 5 year fixed rate is 2.4%. With new rules borrower will stress test at 4.64%. Overnight increase of rate is 2.2%. This is huge.
“Almost a million Canadians wouldn’t be able to handle even a one percentage point increase in the interest rate they pay on their debts, new research says.”
If 1 million cannot handle 1% increase, how would they handle over 2% increase.
When the mortgage is up for renewal, will the bank refuse to renew if the borrower cannot pass the stress test?
Are we expecting a big crash here??
Why I’m a loyal fan in one short reply.
You were deleted for a racial reference. — Garth
Your blog, your advertisment, $6,667.67 per word or minimum $20,000/year for deleting me.
Money you do not need.
It’s not about money. — Garth
I don’t have a problem with the government knowing what people sell their houses for. CRA already knows how much money we make on everything else, so why not how much we make on our houses?
My wife – a Chinese national until a few years ago – is furious that we are so naive and make it so easy to get ripped off. In her words: “everyone can steal from Canada, it’s so easy, are you blind?”
I call bs
If it’s “so easy” how much has she stolen?
Probably nothing.
It’s always other people right?
Foreigners right?
Suuuuure.
Note to Conservatives: You can still dislike T2 and admit this is a good move. Come on, you can do it. Give it a try….the world is shades of grey, not everything he does is wrong.
Any good moves by the conservatives that you would like to admit? Come on, you can do it. Give it a try… the world is shades of grey, not everything they did was wrong.
That’s what I thought
I’m conflicted on this. One the one hand I have to be in favour of catching all tax cheats (no matter what the nationality).
On the other hand I work for the Government so I’m fully aware of “scope creep”. Others above have mentioned it, but now the CRA (and the gov’t of the day by default) will have all of this information on untaxable capital gains and might have FOMO on the cash cow. They’ll find creative and not so creative ways to get it.
Wow pure insanity, Vancity RE dropping like a rock, haven’t seen anything like this since California or Vegas melt down:
http://www.bnn.ca/vancouver-home-sales-down-32-6-in-september-second-month-after-foreign-buyers-tax-1.579170
Tax cheats will hate these new rules, which means to me the new rules are great.
Wanting privacy does not mean you cheat. What a childish comment. — Garth
DELETED
#232 X on 10.04.16 at 9:15 am
That would be a great surprise for many who not only have basement suites (which doesn’t really sound fair, as the gov’t has been getting tax money from the rental income all along), but also from many who have a home office space, or who use part of their family home to rent storage space for their business or corporation to store supplies and such.
///////
they already get to deduct those expenses against their income?
Need a better job….going to apply at the CRA. Beware the Moose auditing your taxes sheeple! hahahaha
#214 TurnerNation on 10.04.16 at 6:37 am
Right it’s all about compliance.
What happened to those Zika and Ebola scare stories. Right….
Both, designed as usual to limit our free travel. Discourage reproduction, and allow spraying of deadly chemicals which if I had to guess cause genderbending and reproductive issues.
Btw did you know according to (even controlled) Wikipedia abortion only is legal in First World countries? That message is clear in its meaning. My offspring are not wanted. Success ends with my generation.
—
Cheer up… the 70’s killer bees moving north from central America didn’t amount to much either
I know a guy who was flipping condos in Richmond years ago and pocketing the gains. He never spent a night in any of them.
If this puts a stop to that, then good.
The procedural implications of this strike me as very straight forward, once the suite angle is clarified: Essentially another form to fill out with any corresponding costs for preparation passed from the agent to the seller to cover this service.
More disconcerting is the Liberals’ enthusiasm for extending government’s tentacles in to all corners of social and economic life. There seems to be no question to which they do not regard the answer as being “More government”.
So the government is going to make you file a little more information to get a potentially MASSIVE tax free capital gain and you are saying that’s a bad thing? You think all those people who own condos as investment properties thought about paying a capital gains tax when they sold? I bet you most didn’t but this is the way it always should have been. Show a little proof to get a fair tax break, big deal.
I agree with most of the move except for the last point: If only a part of your home qualifies as your principal residence and you used the other part to earn or produce income, you may have to split the selling price and the adjusted cost base between the part you used for your principal residence and the part you used for other purposes (for example, rental or business). You can do this by using square metres or the number of rooms, as long as the split is reasonable.
This will play out very poorly in Vancouver where the vacancy rate is so tiny. You would think the gov’t would not penalize folks in detached houses making space for more people and increasing the rental pool. Furthermore, I worry that the landlords with basement suites will be tempted to evict their current tenants to recombine the property into a single house and avoid losing half the value to capital gains.
#230 pBrasseur on 10.04.16 at 8:46 am
I don’t disagree, but how is it fair to totally exempt house flipping but not other assets?
————————–
by:
1. smart zoning and land development, provisioning for infrastructure, see Europe.
2. remove CMHC ‘insurance’
3. duration of ownership, if you own a house for more than few years it is not flipping.
speculation will always be there but it will be minimized. as supply and demand will be normal, we have most land in the world, small population and the world most expensive homes as a nation so definitely something si very wrong with our housing model.
Just to clarify: I have nothing against capital gain tax as far as real inflation is accounted for.
Let’s have independent body that measures inflation (as governments have incentives to downplay and under-report it) and include that in the calculation of capital gains.
The perception that my $ 100 in the bank that earn 10 cents a year (0.1 %) while reported inflation is 2-3 % (real 5 %+, housing 10 % +) so my ‘capital’ is ‘growing’ somehow and I am getting richer so I should be taxed 5 cents out of these 10 is insulting to any intelligence.
The purpose of the laws and the taxation system is to be fair.
#187 Victoria – the original on 10.04.16 at 12:04 am
I live in an area in Victoria called Broadmead. People are not allowed to have suites for rent. Your in-laws or kids can live in them but that is it….
We have a nanny suite and I called up the Saanich Council and said could I rent it out – the woman I spoke to said well you are not supposed to but we won’t say anything if you don’t – exact words….
====================================
You might be fine – until your neighbours report you. Many of them won’t accept it. It’s supposed to be an “upscale neighbourhood” is it not? Is this the area that also has a covenant banning home daycares?
Good luck with your neighbours, you may need it.
Yes, and I do believe that we should be able to get tax returns on the difference between the real market interest rates on deposits and zero ‘banker’s’ rate.
Good news for glass condo owners:
https://ca.finance.yahoo.com/news/poll-suggests-majority-support-national-080004163.html
unilaterally imposed carbon tax.
This is definitely not a privacy issue. We, the people, are trying to get this data (bought and sold price data) published on websites to facilitate a better housing marketplace and inform consumers. Sending the same information to the CRA once every 5 or 10 years (or once in a lifetime) is definitively not an invasion of privacy.
#238 WalMark of Sadkatoon on 10.04.16 at 10:00 am
Any good moves by the conservatives that you would like to admit? Come on, you can do it. Give it a try… the world is shades of grey, not everything they did was wrong.
___________________
Absolutely, the first one that comes to mind is the drop of the GST from 7 to 6%. That was a good thing. The drop to 5% created a structural deficit, but let’s stay with the positive.
Also I loved the way Harper campaigned during the last election – a negative only approach that was all but guaranteed to fail. That was fantastic.
Morneau changes must be meaningful, considering what Canadian Mortgage Trends just wrote about it:
http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2016/10/is-this-the-last-nail-in-the-coffin.html
Wow.
Garth,
I get the concern about scope creep with the taxman, but hasn’t the horse left the barn a long time ago? If Big Brother wants to tax us even more, voluntary disclosure of the address the CRA already corresponds with isn’t going to make things any worse.
Let’s look at what really happened here:
1) The Communist/Marxist CMHC will now insure fewer poor quality mortgages. What looks like more regulation is actually government interfering less (i.e. insuring fewer dodgy mortgages).
2) Some moral hazard may be shifted from taxpayers to the banks. Again, a step in the direction of less government interference in the ‘free’ market.
3) The government will begin enforcing the tax rules on its books and outside of the Primary Residence will no longer favor housing as an asset class. Theoretically this should encourage some moisters to invest in a diversified portfolio instead of single (favorably taxed) asset class.
Yesterday’s announcement was a step in the right direction of prices falling to a reasonable multiple of median income. Right now it’s a race to the bottom because every Tom, Dick and Harry making $60K/year is qualifying for a large mortgage, backed by Big Brother. This has done nothing for the Middle Class except create asset price inflation and a generation of debt slaves.
I gotta tell you, with CRA obtaining a pipeline into the land registry data, this is gonna be a HUGE hit on all those flippers. Wow, like the CRA fat cats are probably thinking, why did we not do this back in the mid-80’s !!
This is also going to bring scrutiny on the real estate lawyers who have the sole ability to change registry data. Accuracy and ‘know your client’ rules and proper documentation to back up changes to the registry are really gonna matter!! [expletive deleted]
#253 Sheane Wallace on 10.04.16 at 11:45 am
Good news for glass condo owners:
https://ca.finance.yahoo.com/news/poll-suggests-majority-support-national-080004163.html
unilaterally imposed carbon tax ….
…….
This is going to lead to brake up of Canada. Alberta will lead the charge followed by Saskatchewan.
Noterly will not gain a single seat in the next Albert election.
Librals and lefties live in a mind wacked state of consciousness. Void of real world reality.
You missed the juicy stuff Garth.
If the rules are followed (a big IF), monolines just saw their businesses hobbled by the exclusion of various B type mortgages from insurance eligibility (and consequently exclusion from securitization)
http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2016/10/is-this-the-last-nail-in-the-coffin.html
Surprise! It seems the honor system wasn’t working.
Now we’ll have a new layer of bureaucracy to extract tax from cheats even though such tools already exist, but not the will to use them. How is that different now?
And I wonder… a many homes are owned in joint tenancy. Which party completes the necessary buy & sell tax schedules and makes them part of their income tax filing? One or both? What happens if/when they part ways?
I see many conundrums. When things get knarly and difficult to interpret, will the CRA err on the side of lenience? Exactly.
Genworth taking a beating on the new mortgage rules:
http://www.bloomberg.com/news/articles/2016-10-04/canada-housing-stocks-fall-as-government-tightens-mortgage-rules
#39 Victoria Real Estate Update on 10.03.16 at 6:53 pm
SALES TANK ACROSS GREATER VICTORIA
(snip)
* A significant drop in sales is a sure sign that a housing market has already begun the correction process.
—————-
Hahahahaha. A “sure sign” eh. Just like you were convinced prices would be declining by now?
This Sept had the highest sales in Victoria since 1992. So despite record low inventory, we hit record sales. At this point a decline in sales isn’t even a return to the mean, let alone a sign of the drop you are hoping and waiting for.
Sales to new listings for Sept was 74%. Hard core seller’s market. Months inventory is 2.2. Super low. We won’t see any changes in price until inventory ramps up.
Could it ramp up with the new mortgage rules? Maybe? Victoria doesn’t have a lot of high ratio mortgages despite the “high” prices. So it may not do much to dampen sales, or may only affect certain categories that new buyers flock to (e.g. western communities and condos).
Will prices drop at some point? Yes. RE is cyclical. However when prices drop you won’t be able to time the bottom, especially when you rely on a single variable like number of sales.
There is no economy left in the west. Just overpriced real estate and money laundering… Guy next to you try to get in your pocket… while Chinese guitar gentle weeps. Be afraid, be afraid, sons of no one….
‘The tax spooked everybody’: Vancouver’s $1,000-a-day home price escalation starts to stutter
http://business.financialpost.com/personal-finance/mortgages-real-estate/the-tax-spooked-everybody-vancouvers-1000-a-day-home-price-escalation-starts-to-stutter
Foreign sales in Vancouver went down with a figure approaching -100% after foreign surtax kicked in.
And people, let’s stop calling it a 15% tax, it is not a tax, it is a surtax that foreigners pay on top of the much smaller property transfer tax that the locals already pay.
Today, BNN reports, home sales overall are down -33% yoy.
Those two numbers could give you a very rough indication of the influence of foreign buys in Vancouver.
Hardly. They show the perceived influence of foreign buyers. When people think markets are about to decline, they stop buying. Simple. — Garth
Canada’s $440-billion mortgage-backed securities market may cool on new rules
http://business.financialpost.com/personal-finance/mortgages-real-estate/canadas-440-billion-mortgage-backed-securities-market-may-cool-on-new-rules
@ #187 Victoria the original
—————–
Saanich is complaint driven enforcement. They won’t check or enforce any bylaw breaches unless neighbours complain. For some complaints it takes more than one neighbour complaining (I think “illegal” suites is one of those.. two different addresses withing 100M must complain.. or something of that sort).
I don’t know if Broadmead has a special covenant or not. That would state the applicable fines. As far as Saanich is concerned in general, they finally opened suites south of McKenzie (used to be only homes north of mckenzie could have suites).
If you get caught with an illegal suite, I doubt they’d fine, however if it isn’t to code (proper drywall thickness etc) they’ll force you to dismantle the kitchen until you meet code. Once you prove you meet code you’d have to pay the suite registration fee etc.
And yes, there is no privacy since 1984…
so empty your pockets and be grateful…
If you do not like it here, we can always deport you to let’s say Afganistan. Now it is a pleasant place to stay, since we liberated all women and children which was our goal to start with…..
To HH, good point and don’t forget keeping all your property tax receipts too. This could easily add up to $100,000 or more over many years.
The ACB increase on this could be a tax reduction anywhere from $20,000 to $30,000.
#254 Bottoms_Up on 10.04.16 at 11:51 am
This is definitely not a privacy issue. We, the people, are trying to get this data (bought and sold price data) published on websites to facilitate a better housing marketplace and inform consumers. Sending the same information to the CRA once every 5 or 10 years (or once in a lifetime) is definitively not an invasion of privacy.
=====================================
Exactly.
“Registered” investments get verified (and taxed) to the cent but for some strange reason RE is subject to different and mostly non-enforced rules? How does that make sense? Especially considering outside us investment crowd, most (~70%) cannucks’ preferred investment is RE.
In fact in my city I can, today, look up online, for free, ANY municipal address and get the exact tax invoices for the last five years. It shows the owner(s), assessed value, precise dimensions and more. This includes commercial as well.
Plus the land registry knows all transactions for a few $$$.
Why the RE industry operates like we are in the 19th century is completely beyond me.
#252 Sheane Wallace
“unilaterally imposed carbon tax.”
There are a lot of problems with carbon taxing. The idea is good, but they forget that we do not get either enough sunlight or wind in Canada, anywhere, to power ourselves. We are not carbon dependent, we are carbon addicted. It is a hopeless cause.
If people are going to continue to live in northern climates, they are going to have to burn something for energy.
All this carbon taxing is going to do, is drive everyone into electricity, which is expensive and will have to be government subsidized. But they have to burn stuff to generate it. Either coal, gas or nuclear. Nukes are incredibly expensive, and coal and gas have carbon.
There is nothing else. Quebec has free electricity in the form of water power (Hydro). Ontario does not. Here we are burning something to generate it.
So all the Feds are doing, is off loading carbon. From one place, to another. I guess there is an argument to be made that if you centralize it, then at least all of the burning is taking place in one location. Rather than having millions of little carbon burns going on (car engines, furnaces, factories etc) you have a few “big burns” and just electrify everything.
But you are still burning something. That isn’t going to change….
Privacy issue?
I get where you’re coming from, Garth.
But we are already required to report all of our income.
I did accounting and tax work for many small business.
The amount of back taxes due is staggering.
Always stay on the good side of the CRA.
Once you’re on their radar, they are like pit bulls.
I find Garth’s position on this one wierd, given all the info on your investment portfolio is available for the government to see, what difference does real estate make? Given the self-assessment style of our tax returns guess how many people claim PR exemptions when it may not be eligible, should have been pro-rated etc.
One way to catch cheater suite renters would be to offer a small tax credit to people that rent suites in homes. That way it would be easy to cross reference anyone claiming the deduction to see if the rental income is being reported.
Everyone, just read the Ministry of Finance communication for yourselves.
Rentals, among other things, don’t qualify for mortgage insurance as of Nov 30/16. Which means monolines can’t do these mortgages (IF THE RULES ARE FOLLOWED).
“Changes to Low-Ratio Mortgage Insurance Eligibility Requirements”
http://www.fin.gc.ca/n16/data/16-117_2-eng.asp
Hayek – (from: The Road to Serfdom)
Murder, rape and theft are immoral simply because they violate a person’s property rights to
himself. Government programmes such as subsidies to farmers, bailouts for businesses, and
welfare or medical care for the indigent are also immoral for the same reason. Government has
no resources of its very own. The only way government can give one person money is to first
take it from another person. Doing so represents the forcible using of one person, through the tax
code, to serve the purposes of another. That is a form of immorality akin to slavery. After all, a
working definition of slavery is precisely that: the forcible use of one person to serve the purposes
of another.
#273 mike from mtl
“Why the RE industry operates like we are in the 19th century is completely beyond me.”
————————————–
It’s because at one time in the not-too-distant past, a home appreciated at about the same rate as inflation with numerous carrying costs that made them poor “investments”.
But one does need a place to live. That is (or was) the key point. You buy a home and live in it. It depreciates physically (like people) and yet still eats money. On the plus side, you can install some granite and hardwood to make it a little cozier and maybe recoup 30% of that expense at some future date.
Keeping track of all that blather was considered more trouble than it was worth. Rightly so.
Enter one ugly global financial crisis, government encouraged home buying, an aging demographic and insanely low interest rates. Then the tables are turned. Speculation becomes rampant and prices soar.
But even that’s OK until foreigners take the blame for all the associated affordability problems and political action is demanded.
And political action is delivered. In a real hurry too, because elections are always looming. No matter that reactive legislation is almost always bad legislation.
Well, well.
How about a bare trust within a corporation.
Canada housing stocks fall as government tightens mortgage rules
http://www.theglobeandmail.com/globe-investor/investment-ideas/canada-housing-stocks-fall-as-government-tightens-mortgage-rules/article32235045
Go here and look at page 7:
https://www.otpp.com/documents/10179/757926/-/58def2c7-2771-4132-ad26-93a549eef033/Annual+Report.pdf
The “best” pension plan in Canada (and pretty much global) has barely enough to cover its commitments – and that is with 11% “deficit funding” modeled in.
There is an enormous tax grab coming to try to support all these pension payouts for the boomers. Sorry, the math does not work out although I’m sure every angle will be played.
History shows many cycles where “the greatest civilizations that have ever existed” collapsed. This is why – no government has ever been able to manage money. This time around is no different.
There are so many Roman coin hoards – ever wonder why??? Go read a history book and you will understand.
Spain’s ‘biggest corruption trial’ opens in Madrid
the “elite” vs whistleblower
Gurtel case has electrified Spain for years, since it was exposed by a civil servant in a Madrid suburb and the case taken on by renowned investigating judge Baltasar Garzon.
slush fund from Switzerland and channelling cash donations to party officials.
#243 NoName on 10.04.16 at 10:28 am
#232 X on 10.04.16 at 9:15 am
That would be a great surprise for many who not only have basement suites (which doesn’t really sound fair, as the gov’t has been getting tax money from the rental income all along), but also from many who have a home office space, or who use part of their family home to rent storage space for their business or corporation to store supplies and such.
///////
they already get to deduct those expenses against their income?
*******
Yeah, as they don’t get to enjoy the usage of that part of their home/garage/basement.
I mean you could go rent a unit, which would probably cost the business owner more, and keep your home fully tax deductible. But it may not be the most cost effective thing for a small business owner to do in a sagging economy.
Remember when I told you about Big banks short RE stocks….. https://betterdwelling.com/the-really-big-short-the-13-7-billion-dollar-bet-against-canadian-banks-over-housing-and-insider-sales/
Coincidence…..NOT, they knew what was comming, kiddos follow the money, you never can go wrong.
#206 Law vs. Compliance…will be a joke on 10.04.16 at 3:13 am
Good move by the Government on tax cheats, foreign or domestic, but enforcement will suck all the way to Hades.
Voluntary disclosure for a Canadian on their tax form? They are TAX CHEATS TO BEGIN WITH, they will play roulette until caught and if caught, the fines are laughable vs. potential RE profit gains ($8,000 vs. $100’s of thousands in profit = a very small cost of doing business).
Foreigners will find a way to put their investments in the hands of Canadian citizens, pay them for their time and not pay a single cent in Canadian tax upon selling.
—
I think that technology will fix most of this over time. If there is any pressure on the Govt it should be to implement technology, not hire more phone callers or door knockers.
http://canadianmortgagetrends.com/canadian_mortgage_trends/2016/10/is-this-the-last-nail-in-the-coffin.html
See the price of gold get hammered today?
Must mean people are gaining confidence in the economy. Typically they seek out gold as a safe refuge in less optimistic times.
What’s to be so optimistic about?
SHIFT happens… learn to ride the tide.
And learn what moves commodity values. The rising US$, on renewed expectations of a Fed increase, is causing this. — Garth
Meet the man who going to start WW3
Trump is leading Huge, these guys are getting desperate.
MSM says nothing….
Read between the lines.
https://www.youtube.com/watch?v=jCAoYe0ie_0
so hope you’re right this time, Garth, on van’s RE getting seriously, finally put into it’s rightful place….but then again: ‘everyone wants to live here, don’t you know?’…
sure we have a nice temperate climate out here, nice outdoors…but it’s culturally a pretty shallow place, hardly ‘world class’…esp when compared to montreal or toronto (former torontonian of 30 yrs, now here on the wet coast some 20)
Re: Suites in Broadmead in Victoria
If any neighbourhood has the snoops to report you, Broadmead is it.
I once heard the snobbiest woman I ever knew invoke “Broadmead” in the same tone as a member of the Monarchist society speaks of the Queen.
So you can image what they think of “renters”.
“And learn what moves commodity values. The rising US$, on renewed expectations of a Fed increase, is causing this. — Garth”
A rising US$ compared to CDN$ on renewed expectations of a Fed increase in… i ? Really?
Why do people buy gold? Why does gold go up? Why does it come down?
Supply and Demand.
Guess I’m missing something.
They don’t have that tax credit in BC … yet?
So how will it work here where there is a basement suite in every house it seems on some streets?
#160 Cdn Mom on 10.03.16 at 10:45 pm
Very interesting. As a landlord that fully reports and pays tax on all rental income, I’m certain there will be some landlord-squirming in the coming days as they learn about this. It would be hard to dodge rental reporting in Ontario, since there is the provincial tax credit for rent paid, which requires annual amount paid, address, and landlord’s name. Every tenant wants that tax credit, no?
Garth. We rent out our basement (35% of the house)and claim the income (one of the few, i’m sure) – with no mortgage, last year we claimed ~$7,000 in rental income. We’ve never claimed CCA.
CRA has this to say about suites:
Exclusions To The Change In Use Rules:
If you decide to rent out a basement or other rooms in the house, you are not considered to have changed use if:
The portion of the property used for rental is small in proportion to the whole property,
You do not make any structural changes to make it more suitable for rental purposes, and
You do not claim capital cost allowance on the part of your rental.
Meeting these requirements means the property continues to qualify as a principal residence.
I have always assumed this would cover us – has anything changed?? Must say I don’t like the extra attention on this.
Thanks for everything!
Garth, proving the sale was your PR starts when, exactly? I sold my home earlier this year, will I have to prove it when I do my taxes in April?
z