Anti-Home Flipping Rules: BC's New Home Flipping Tax Summary

In this article, I follow up on a previous article titled "Anti-Home Flipping Rules: A Deep Dive into Subsections 12(12), (13), and (14) of the Income Tax Act" with regard to the federal anti-home flipping rules by elaborating from a provincial aspect.

What is the BC Home Flipping Tax?

Starting on January 1, 2025, the province of BC's Residential Property Flipping Tax (the "Flipping Tax") targets quick-turnaround sales of homes, condos, and townhouses. At its core: a 2-year holding period where profits are taxed at up to 20%, with a handy $20,000 deduction for principal residences held over a year.

• Note that although federal legislation provides for a full on exemption on principle residence proceeds, the BC flipping tax does not.

The Flipping Tax is a provincial levy on the net taxable income earned from selling a residential property (or assigning a purchase contract) within 730 days (about 2 years) of acquiring it. It's not a federal capital gains tax – this is cumulative, on top of your federal tax obligation (reminder, the profit from a speculative home flip is taxed 100% federally as business income pursuant to subsection 12(12) of the act).

And yes, the new flipping tax IS retroactive!

As per the provinces official guidelines "Property purchased before the tax’s effective date may be subject to the tax if sold on or after January 1, 2025 and owned for less than 730 days, unless an exemption applies".

How the 2-Year Rule Works

The "2-year" refers to the 730-day window from acquisition to disposition. If you sell after that, zero tax. Within it, the rate starts at 20% and tapers off:

• Days 1–365: 20% tax rate on net taxable income.

• Days 366–730: Rate decreases linearly (e.g., ~10% at day 547, 0% at day 730).

Are you subjected to the tax?

As per the provinces official guidelines, states "a person (which can include an individual, corporation, partnership or trust), the seller of which may be a B.C. resident or a resident anywhere else in the world". But what exactly does this mean? Let's dissect this below.

Applies to:

• Both; Canadian residents and non-resident sellers .. meaning you sold the property with the intention of selling.

• Sales of taxable properties, that which were a result of "the execution of a contract by which a beneficial interest in residential property is transferred from the seller to the purchaser in exchange for consideration in money or in kind"; which includes pre-sale assignments.

• Arm's-length sales of BC residential properties (up to 4 units).

• Properties zoned for residential use.

Does NOT apply to:

• A deemed disposition of a property as triggered under a provision of the federal income tax act, such as disposition on death or a change-in use (Section 45), is NOT subject to the flipping tax.

• Gifting a property, although may trigger a taxable event in itself, is NOT subject to the flipping tax (certain stipulations apply, see below).

• Selling a leasehold interest in a residential property is NOT a subject of the flipping tax.

• Inherited properties from a heirs estate that are sold within 730 days of acquiring the property are NOT subject to the flipping tax.

• Life Events: Divorce, job relocation, serious illness, or safety threats forcing a sale are NOT subject to the flipping tax.

• Expropriation of property is NOT subject to the provincial flipping tax.

• Subdivisions/Developments: If the property is subdivided and flipped as part of a larger project, it is NOT subject to the flipping tax.

• Developers who initially entered into an agreement which establishes a right to acquire a property (a developer enters into a presale agreement with an initial purchaser) are NOT subject to the flipping tax (and further related developer exemptions).

• Properties located in treaty lands of First Nations tribes.

• Primarily commercial-use property.

When do I need to notify the province?

If you find yourself within the scope of the provincial flipping tax, you must file an applicable provincial return within 90-days from the date of sale (this is a separate, provincial filing from your T1, T2, T3, or T5013 filing, etc.).

Failure to, or a late filing of the applicable flipping tax return may result in penalties and interest – that which is the greater of $500 or 5% of the unpaid tax plus additional accrued interest for each month the return was late.

Learn More

Thinking of selling? Contact us today to learn more about filing compliance (we cover all structures; LLP's, Trusts, Corporations, and individuals (resident and non-resident)) and how we can file for you.

Source: https://www2.gov.bc.ca/gov/content/taxes/income-taxes/bc-home-flipping-tax