The Canadian real estate market is strong and potentially quite lucrative. Even during the worst economic times of the brand new millennium, real estate in Canada weathered the storm remarkably well. Plus, there are not any citizenship or residency requirements for owning property in Canada. Truly, you can live in a Canadian dwelling on a temporary basis, even without residency or citizenship; though there are immigration requirements for lengthy stays. However, the marketplace is open to investors round the world but to take advantage of your investment, it is essential to really have a strong understanding of taxes in Canada.
Property taxes in Canada will differ from province-to-state and even determined by the municipality. Among the very first things you must be aware of is that when you buy property here, youwill have to pay a provincial transfer tax. Again, this varies between provinces, but you need to expect to pay between 1 and 2% of the value of the property. Sometimes, there are exemptions to this transfer tax; for instance, the first property you buy in Canada does not carry this transfer tax.
As I’ve already alluded, annual property taxes are compulsory and vary by municipality. Based on the determined value of your property as decided upon by the market, property taxes comprise fees for schools, parks, and other community amenities.
Finally, you’ll also pay the federal Goods and Services Tax (GST) on new home purchases. In case you plan to stay in the home, which is a new or contractor-renovated home, you might be eligible for a partial rebate on the GST.
Rental Property Taxes:
If you plan on buying an investment property in Canada with the aim of renting the property for income, you must know about the Canadian Income Tax Act requirements. The Act stipulates that you pay 25% of the gross property rental income as tax. Learn more on Eddie Yan from this source. Non residents can generally choose to pay 25% of the net rental income instead; this means you’ll be able to deduct a lot of the expenses connected with managing the property – you just need to submit an NR6 form. Specific expenses cannot be deducted, nevertheless; for example, operating and expenses and capital expenses can be deducted, while the price of furniture or equipment for a rental property cannot. Additionally, property taxes in addition to mortgage, bank loan, or line of credit interest payments are all tax deductible.
Selling your Property:
Pay close attention, as selling your property in Canada has different prices for residents and non residents. Residents who inhabit a property as their main place of dwelling can sell a property without paying capital gains tax. Should you own multiple properties, you have to designate just one property as your principal place of dwelling. Sale of properties that are not your main place of residence are subject to capital gains tax.
Non-residents when selling a property are subject to a 50% withholding tax, and American residents must also report the gains to the Internal Revenue Service. As it is possible to see, there are important tax consequences for purchasing and selling properties in Canada.