Housing taxes in Canada are financial obligations imposed on home owners by provincial, municipal, or local government to fund the public services. Housing taxes in Canada are assessed every year and are based on the value of the property.
Key takeaways:
- Housing taxes in Canada are financial obligations imposed on home owners by provincial, municipal, or local government to fund the public services.
- Housing tax amounts are calculated using your home’s value and the municipal property tax rate.
- Payments might be made annually, semi-annually or quarterly.
- Underused housing tax is an annual tax that is imposed on non-Canadians that own a company/trust that is considered vacant or underused.
- A tax return is a document filed with a tax authority that reports income, expenses, and other relevant financial information.
Table of Contents
How Housing Taxes in Canada Work
Housing taxes in Canada are collected by the local government for a range of public services in the community, including police and fire stations, schools, roads, garbage collection, snow removal and sewers. Housing tax in Canada amounts are calculated using your home’s value and the municipal property tax rate.
Payments might be made annually, semi-annually or quarterly. Your housing tax in Canada bill may include a breakdown of where your money is going.
What Are the Categories of the Housing Tax in Canada?
Housing tax in Canada has three main categories based on the purpose of the tax:
- Municipal Tax: This is for funding local services like police, fire departments, and waste management. The rate and services covered can vary by city.
- Education Tax: This portion of the property tax goes towards funding the public education system.
- Other Levies: Some municipalities may have additional levies for specific purposes, like city building funds for infrastructure projects.
What Are the Payment Methods?
There are different payment methods for paying your housing tax in Canada that you can use. Here you can read about them to choose your payment method more easily:
- Pay the municipality directly
- If you chose this option, then it becomes your responsibility to pay on time. You will receive a property tax bill by mail.
- Pay through your mortgage
- In case you pay your property taxes through your mortgage, your lender makes the payment on your behalf and then adds a fee to your mortgage payments. To do this, your lender will take the annual property tax owed, divide it by 12, and add that amount to your monthly mortgage payments.
What Is the Underused Housing Tax in Canada?
The Underused Housing Tax (UHT) is a 1% annual Housing tax in Canada levied on the value of residential property owned by non-Canadians and some companies/trusts that is vacant or considered underused. The intention of this tax is to deter non-residents and some companies/trusts from passively investing in Canadian real estate and to make housing more available to Canadian residents.
Underused housing tax is an annual housing tax in Canada that is imposed on non-Canadians that own a company/trust that is considered vacant or underused. The tax would be 1% on the value of the residential property.
What Is a Tax Return?
A tax return is a documentation filed with a tax authority that reports income, expenses, and other relevant financial information.
When Is the Deadlines for the UHT Returns?
The deadline for the first ever UHT returns (for persons who owned property on December 31, 2022) was extended to April 30, 2024, but subsequent returns will be due on April 30 of the following year. For example, 2023 returns will be due April 30, 2024, 2024 returns will be due April 30, 2025, and so on.
Who Must Pay the Underused Housing Tax?
Owners who have to file a return can claim an exemption for a residential property (including a detached house, semi-detached house, or condo unit) that is one of the following:
- A primary place of residence for the owner, owner’s spouse, common-law partner or child.
- A rental property occupied at least 180 days of the year.
- Not accessible or suitable to be lived in year-round or seasonably inaccessible.
- Uninhabitable for a certain number of days due to a disaster, hazardous conditions or renovations.
- Newly constructed and not substantially completed before April of the calendar year.
- A vacation property in an eligible part of Canada, used for at least 28 days in a calendar year.
The UHT is also not payable by an owner:
- Who died during the year.
- That is a Canadian corporation with less than 10% foreign ownership.
- That is a partnership where all members are either excluded owners or Canadian corporations with less than 10% foreign ownership.
- That is a trust where all beneficiaries are either excluded owners or Canadian corporations with less than 10% of foreign ownership.
However, these owners would still need to file a return to claim an exemption.
What Are the Complexities of the New UHT?
American residents who own Canadian vacation property would be required to file a UHT tax return and claim an exemption to avoid paying UHT, unless they were Canadian citizens, in which case they wouldn’t have to file a return.
Canadian residents who personally own a residential property that is rented out or used personally throughout the year do not need to file a UHT return. However, if they owned that same residential property as a partner, through a trust or a corporation, the partners, trustees or corporation would be required to file a return and claim an exemption to avoid paying UHT.
Even if a private Canadian corporation has an off-calendar year end, if it owned a residential property on December 31, it would need to file a return by April 30. If the corporation owns multiple properties, it would need to file a return for each property, even if it can claim an exemption.
How to Calculate the Property Tax?
Calculating your property taxes is fairly straightforward. If you have a home in Montreal, for example, and its market value is $500,000, you would multiply $500,000 by the current residential tax rate (0.59%) to get $2,950, which is approximately how much you would have to pay in property taxes for the year.
Payment Options for Underused Housing Tax
In Canada, the payment options for the Underused Housing Tax (UHT) include:
- Online: Individuals and corporations with a Canadian bank account can use the “My Payment” service.
- By wire transfer or internationally issued credit card: For those without a Canadian bank account or corporations without one.
- By cheque: Cheques should be made out to the Receiver General for Canada, with the calendar year and tax number (SIN, ITN, TTN for individuals; CRA UHT business number for corporations) included in the memo field.
All payments must be made in Canadian dollars.
Last Words About Housing Tax in Canada
Housing tax in Canada is collected by the local government and is used for different purposes including
police and fire stations, schools, roads, garbage collection, snow removal and sewers. Different payment methods might be through municipality or through your mortgage.
The Underused Housing Tax (UHT) is a 1% annual Housing tax in Canada levied on the value of residential property owned by non-Canadians and some companies/trusts that is vacant or considered underused.
This tax’s purpose of determination is to discourage the non-residents and some companies/trusts from passively investing in Canadian real estate and to increase the availability of housing for Canadian residents.
