Exploring home purchase fees with award winning Vancouver realtor Paul Toffoli - recently voted "Best Realtor in Vancouver" by Georgia Straight Readers
Mark: Hi, it’s Mark Bossert from Top Local Lead Generation and we’re here with award winning realtor in Vancouver, Paul Toffoli. Paul we’re going to talk about what taxes and fees are payable on a home purchase in BC. How’re you doing today?
Paul: I’m well, Mark, I can’t believe it still summer sort of. So, Mark we agreed we’d talk about taxes and fees that apply to purchasing property in British Columbia and it’s actually really straightforward. If you’re buying a brand new property in Canada, but in BC particularly, there is GST that applies, it’s a 5% tax, there are rebates on that if your purchase price is under, I believe it’s $450,000 dollars, so each transaction needs to be calculated and of course, that only applies to brand new properties. If it’s a resale property, so something that’s been lived in for even six months, or sometimes people will actually have a brand new property that they paid GST on and then they flip it right away, then typically there is no GST payable on those transactions. That being said, I think the CRA may feel that if it hasn’t ever been lived in, that the GST should be paid twice. So that’s a good question for your accountant to clarify that. But typically we only see GST being paid on the property the first time it’s bought, as a pre sale or a brand new property and that’s 5% with rebates.
For resale properties, so that’s something that’s been lived in before or is not brand new, then there is no GST. Now there is another tax, a provincial tax that applies to all properties. So regardless whether it’s a new property and you’re paying GST or resale property where you’re not paying GST, there is always property transfer tax that is applicable. That tax is 2% of the first $200,000 dollars, sorry take that back, it’s 1% of the first $200,000 dollars plus 2% of the balance, that goes on up to the top.
Now, if you’re a first time home purchaser, purchasing under $475,000 dollars as of this taping, then there is no property transfer tax - there is a full rebate. You will have a rebate up to about $525,000, and it slowly disappears once you hit that $525,000 mark there is no rebate at all. It’s not you get it free on the first $475,000 and it’s gone. Once you hit that number you’re paying the freight.
Again, it’s 1% on the first $200,000 dollars plus 2% on the balance. There are also some other exemptions. If you’re transferring between family, so my first home I bought from my grandmother, it was a family home she’d been in for many years. I did not have to pay property transfer tax on that because it was a transaction between direct family members. So those are the main ones. You do have other fees and other costs. You have home inspection - on 95% of all transactions unless it’s brand new property with the warranty, you’re going to have legal fees. So we’re talking about when you transfer property you have to hire a lawyer or notary to do the conveyancing of that property. That typically on a purchase is around $900 - $1500 dollars, depending on the complexity and who is doing the work, and also on a sale of a property you’re going to have that cost. So those are the main ones.
On selling a property, what are the costs? You’re going to have some legal fees, like we just talked about, but it’s typically a little less - under a $1000 dollars, including discharging a mortgage. The biggest one is real estate commissions, real estate fees and those will vary depending on your realtor so that’s something to talk about. But all of the taxes on those transactions are paid by the buyer. Now unless, it’s a revenue property.
We’re fortunate in Canada that we have a capital gains exemption for our principal residences. So if you bought your home 20 years ago for $400,000 dollars and you’re selling it today for $1.5 million there is no capital gains tax on that gain. If it’s a revenue property, however, you would be paying capital gains tax and again, talk to your accountant about the details, but generally you’re taxed on 50% of the gain at your marginal tax rate. So if you’re in the top marginal tax rate of 48%, you’re going to pay about 24% tax on that total gain.
I think that covers most the costs and fees on buying and selling real estate in British Columbia.
Mark: Awesome. Simple, sweet, easy. Thanks a lot Paul. Paul’s an award winning realtor here in Vancouver, just recently voted by the readers of the Georgia Straight magazine as the best realtor in Vancouver. You can reach him at www.toffoli.ca or give him a call at 604-787-6963. Thanks Paul
Paul: Thank you Mark