Property Tax
Property Transfer Tax is a National Scam
One of the things that keeps reminding me that I no longer in Arizona but back ‘in the nanny state’ is the national scam known as Property Transfer Tax (PTT). Everyday I deal with folks who are scraping up there hard earned cash to start building some equity or create a better life for their family, quite a number have already purchased a house a few years back and are no longer exempt from this national travesty.
I don’t have a problem with the Government collecting its fee’s off of property ownership, if you have ridden the housing market up and gained a lot of paper equity then it’s a small price to pay for your winnings. But… what really irks me is that they keep collecting on properties that have had it paid and paid and paid, a gift that just keeps on giving.
Property Transfer Tax Rates http://www.sbr.gov.bc.ca/individuals/Property_Taxes/Property_Transfer_Tax/tax_rates.htm
The amount of tax due depends on the fair market value of the property that is transferred:
* If the fair market value is $200,000 or less, the tax is 1% of the fair market value
* If the fair market value is greater than $200,000, the tax is 1% of the fair market value up to $200,000, plus 2% on the portion of the fair market value that is greater than $200,000
For example:
* if fair market value of property is $150,000
tax payable is: 1% of $150,000 = $1,500
* if fair market value of property is $250,000
tax payable is: 1% of $200,000 = $2,000
plus 2% of $50,000 = $1,000
for total tax payable of $3,000
Real World Example
You are purchasing an older home you intended to fix up and sell for a profit in the Valley for $490,000
-you pay PTT on $490,000 ( for arguments sake I am not going to include the first time buyers and other ‘exceptions’)
tax payable is: 1% on $200,000 =$2,000
plus 2% of $290,000 =$5,800
Total tax payable =$7,800
-You then renovate the home and make several ‘improvements’ such as remodeling the kitchen, upgrading the landscaping, or heck even take out a wall or two.
-After 8 months of ownership and finishing your renovations you meet with an agent and decide to put it on the market at $560,000 a nice $70,000 profit.
-The property sells at $550,000
-The new buyer will have to pay Property Transfer Tax on $550,000 at $9,000 the Government has just double dipped on this property in one year, and made $16,8000
How do they collect twice in one year, it’s almost strong armed robbery.
What brought this to my attention was the fact that in today’s July 23, 2008 Vancouver Sun’s Don Cayo wrote a great editorial about the PPT, it was more focused on business and you would not believe how they put it to small businesses, I guess that’s what makes us individuals accept our medicine.
At TD Canada Trust we do not finance the PTT and ensure that it is collected by the conveyance, guess that with the no down payment mortgage your new down payment will have to be a tad larger still…..
What are your thoughts on the Property Transfer Tax?
