The federal government announced on Thursday that it is officially seeking to implement an anti-flipping tax on homeowners across Canada.
The proposed tax, included in the 2022 Federal Budget put forward by Minister of Finance Chrystia Freeland on Thursday, would affect homeowners who sell a principal residence that they've held for less than 12 months. According to the budget, the profits from this type of sale would be taxed as business income -- a change from current Canadian legislation which allowed a capital gains tax exemption on all principal residences.
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"Property flipping — buying a house and selling it for much more than what was paid for it just a short time prior — can unfairly lead to higher housing prices, and some people who engage in property flipping may be improperly reporting their profits to pay less tax," the federal budget reads. "Budget 2022 proposes to introduce new rules to ensure profits from flipping properties are taxed fully and fairly."
The federal government did note, however, that not every sale made within 12 months of purchase would be subject to the tax. Extenuating circumstances that may cause a homeowner to sell within a year of buying, such as the birth of a child, death, disability, a new job, or a divorce, would allow them to be exempt. According to the budget, these exemptions "will be set in forthcoming rules and Canadians will be consulted on the draft legislative proposals."
"This new measure will ensure that investors who flip homes pay their fair share, while protecting the current, vitally important, principal residence exemption for Canadians who use their houses as homes," the budget reads.
Although the proposed tax was officially presented in the budget, it has been discussed by the Liberals for quite some time. It was originally proposed in the party's housing plan, laid out as part of their 2021 campaign platform, and is just one of several measures they hopes to use to help cool the market.
The new tax would apply to residential properties sold on or after January 1, 2023.