What EVERYONE needs to know about the Vacant Home Tax

New year, new tax. The City of Toronto’s Vacant Home Tax is now officially in effect. 

As of January 1, 2023, any residential property in Toronto that sits empty for more than 6 months of a calendar year will get hit with a tax that’s 1% of the assessed value. So if your $1M home was unoccupied for more than half of 2022, you’ll be on the hook for $10K – and that’s above and beyond your usual property taxes. 

But if you live in your home year-round, don’t dismiss the tax as something that doesn’t apply to you. To avoid paying it, you have to PROACTIVELY make a declaration to the city by February 28, 2023. You’ve likely already gotten a notice in the mail, and if you haven’t done so already, you can make your declaration through the City of Toronto’s portal anytime. Not submitting on time could result in a $250 fine. 

The tax applies to both owner-occupied properties and rentals. To be exempt from it as a landlord, there had to have been tenants living in your rental unit for more than 6 months in 2022. FYI – not being able to find renters won’t get you off the hook. 

The tax applies equally to residents and non-residents of Canada. In related news, the federal government has announced a country-wide tax on vacation properties owned by non-residents. 

There are some exceptions to the tax if you face extenuating circumstances…

You won’t have to pay the tax if the property is vacant because: 

1. You’re renovating and can’t live there during construction

2. You’re in hospital or long-term care

3. The owner has died

4. The property is under a court order that prohibits someone from living there

5. The home is in the process of being transferred to a new owner

What if I say my property was occupied when it really wasn’t? 

We don’t recommend lying about the status of your home: that’s fraud and you could face some pretty stiff fines if you’re caught. That said, how the city will actually enforce the tax is still up in the air – they haven’t shared any specifics yet. But they have said that declarations may be audited. If that happens to you, you’ll have to prove that you or someone else has been living there. 

Why tax vacant properties? 

It’s no secret that we’re in a supply crunch. Toronto has a serious shortage of rentals: people looking for homes can’t find them while a significant number of places are just sitting empty. The idea behind the tax is to free up more rental properties, and boost availability and affordability by discouraging people from leaving their places unused. The tax will also be a moneymaker for the city: it’s expected to raise up to $65M, which will be used to build affordable housing. 

But is this an approach that will actually put more housing into the mix? Well, if you look at Vancouver, which instituted a similar tax in 2017, the likelihood is actually pretty good. Vancouver’s tax has added 20,000 properties to the rental market over the last 5 years (mostly condos), and has raised hundreds of millions for affordable housing initiatives. 

So it all boils down to this…

• If you’re a homeowner, submit your declaration, pronto. 

• If you own a property that sat empty for more than 6 months last year, you’ll have some extra taxes to pay, and some thinking to do. Do you live there yourself for more of the year? Rent it out? Sell it? If you need an agent to help you put it on the market, get in touch. 

• If you’re looking to buy a property, be aware of the rules around occupancy, and don’t buy something that will sit empty. And, you can always search for available properties on condos.ca and property.ca.