There are so many questions when it comes to BC's new Speculation and Vacancy Homes Tax. For the first time, owners of BC property will be required to make a declaration due on March 31, 2019.
One scenario that has come up is when BC resident parents have purchased a BC residence for an adult child to live in while they attend university. Will parents have pay speculation tax on that property occupied by their adult child?
If they meet all the following criteria, then the parents will be exempt from paying the tax:
- the adult child is not the parent, the parent's spouse, or a minor child living with their parent or guardian;
- be a Canadian Citizen, Permanent Resident or Provincial Nominee;
- be a resident of BC for income tax purposes;
- live in the residence for periods of at least one month at a time;
- live in this same residence more than anywhere else within each of those months;
- not be a member of a satellite family; and
- have BC income in 2018 of at least 3 times the annual fair market rent of the property.
For example, Vancouver parents buy a Kelowna property (that normally rents for $1,000/month) for their adult child to attend university. So long as the child is making BC income in 2018 of at least $36,000 and meets all the above criteria, the parents will be exempt from paying the speculation tax. If any of the above criteria are not met and the parents don't fall within any other exemption, then the parents would have to pay. If the property was assessed for less than $400,000, then there could also be a credit.
One of the more difficult criteria to overcome is probably the adult child's income, especially while they are a student and with market rental rates in the urban centres like close to UBC, SFU, Kwantlen, Capilano University, or UVic. A couple of options might be to put the property in the child's name alone or for a percentage with the parents (if the parents don't qualify, then the exemption would only be in proportion to the child's ownership).
Be sure to make your declaration before March 31, 2019!