Election debate fact-check: Does Trudeau need a tax on major residences? – Nationwide

Housing affordability, one of many high points on the marketing campaign path, was as soon as once more within the highlight on Thursday night throughout the one English-language debate within the present federal election.

It was then that Conservative Chief Erin O’Toole raised the spectre of a re-elected Liberal authorities taxing the sale of major residences.

“Mr. Trudeau, Canadians are fearful you’re going to be taxing their major residence gross sales,” O’Toole stated throughout the section of the controversy dedicated to the theme of affordability.

“Your advisers have stated it … it’s on web page 14 of its coverage guide,” the Conservative chief stated, talking to Trudeau and referencing the Liberals’ election platform.

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However are the Liberals actually proposing to introduce a tax on the sale of major residences?

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Hardly. Web page 14 of the Liberal platform speaks of creating “an anti-flipping tax, requiring properties to be held for at the least 12 months.”

A capital achieve is a revenue from the sale of an asset, corresponding to a monetary funding or a property. Canadians at present might should pay tax once they promote belongings like shares or actual property at a revenue, however not on the subject of their major residence, which is exempted.

Usually, capital beneficial properties tax solely applies to secondary residences corresponding to trip properties and funding properties.

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The Liberals’ anti-flipping tax seems to be aimed toward curbing abuse of the principal residence exemption by requiring that house owners maintain within the residence for at the least 12 months.

Nevertheless, Canada has already cracked down — to an extent — on home-flippers taking benefit of the present guidelines to skirt the tax on profitable residence gross sales.

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When house-flipping first gained momentum, many individuals received the concept of dwelling in the home they supposed to flip so they may declare it as a principal residence.

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Nevertheless, “it didn’t take lengthy earlier than (the Canada Income Company) CRA put the lid on this observe by imposing stricter necessities for major residence designation,” writes Jennifer Gordman at Turbotax Canada.

“The intent on the time of buy, variety of purchases and gross sales, and the timeframe between principal residence designations are all thought of when figuring out the exemption,” she provides.

Beginning with the 2016 tax yr, Canadians have been required to report fundamental details about the sale of their major residence on their revenue tax return.

The notion of taxing capital beneficial properties on a principal residence has gained consideration as Canada debates methods to deal with skyrocketing actual property valuations. The nationwide common residence value rose by greater than 30 per cent between July 2019 and July 2021, in line with knowledge from the Canadian Actual Property Affiliation.

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Some have proposed extending the capital beneficial properties tax to major residences as a option to decelerate residence costs progress and even deliver down costs.

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However various housing specialists World Information spoke with earlier this yr had been cool in regards to the concept.

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One of many thorniest points about taxing principal residence is {that a} principal residence is the most important funding many older Canadians have.

“There’s an fairness impression … particularly for seniors,” Diana Petramala, senior economist on the Centre for City Analysis and Land Growth at Ryerson College, instructed World Information.

The measure may additionally backfire for millennials, by discouraging older householders from downsizing and releasing up a few of Canada’s scarce provide for bigger properties, she added.

Broadly more and more the present capital beneficial properties tax on non-primary residences would additionally “discourage all types of actual property funding, not simply flipping. For instance, it will cut back the inducement to personal long-duration rental property, which may work towards much-needed rental provide,” BMO senior economist Robert Kavcic echoed in a report in March.

© 2021 World Information, a division of Corus Leisure Inc.

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