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What Investors Should Know About the Vacant Home Tax Increase

Posted by Editor on December 19, 2023

Investors and homeowners in Toronto will face significant changes due to the upcoming Vacant Home Tax (VHT) increase. From 2024, the new VHT will increase significantly from 1% to 3%, impacting homeowners. 

The Vacant Home Tax is a property tax that applies to residential property owners in the City of Toronto. Homeowners in any property tax category must report the occupancy status of their home once a year. This obligation applies to all property owners, including those who live on the property.


If your home is unoccupied for more than six months during the last calendar year or is deemed “vacant,” you may be subject to paying the tax by-law. 

The Vacant Homes Tax (VHT) was enacted in 2021 and City of Toronto Municipal Code and added Chapter 778, Taxation, Vacant Home Tax. By Law 97 was passed as a way to help increase housing supply by preventing homeowners from letting their homes sit vacant. The incentive is to encourage homeowners and investors to increase affordability in Toronto’s underserved housing market by renting or selling vacant homes. Homeowners who choose to leave their properties vacant will be hit with this tax, making their taxes more expensive. 


Starting in 2024, the tax will increase from 1% to 3% and a current value assessment (CVA) will be levied on all residential properties in Toronto that have been declared, deemed or determined to be vacant for more than six months in the year previous. year. year.

To put things into perspective, if the CVA of your property is €1,000,000, your new tax liability will be €30,000 (3% x €1,000,000) and not €10,000 (1% x 1,000. 000 EUR). 


The tax is determined based on the residential status of the home and the CVA of the previous year. For example, if your house is empty in 2023, tax will be calculated based on the 2023 CVA and paid in 2024. 


According to the city, this tax increase could bring in between $55 million and $66 million in annual revenue. The city will use the proceeds for affordable housing initiatives, including the multifamily housing acquisition (MURA) program. It helps preserve and create sustainable, affordable housing owned by nonprofits and local housing organizations. Ultimately, the goal is to increase the affordability and affordability of housing to encourage owner occupiers and investors to occupy their homes.


Who Is Exempt From Paying the VHT?


In certain circumstances, a property can be exempt from VHT even if it is empty. There may be exceptions, including but not limited to the following scenarios:


When the registered owner dies and the property remains vacant for more than six months. A copy of the death certificate is required as proof. 


This property is undergoing major repairs and renovations and is not available for occupancy. A copy of the repair and maintenance authorization is required as proof. 

The primary occupant of a vacant property resides in a hospital, long-term care facility, or assisted living facility for at least six months during the tax year. A signed letter from the medical facility is required as proof. 


Existing court orders prohibit the use of vacant property for at least six months during the tax year. A copy of the court order is required as evidence. 

Developers can claim this exemption for properties that have never been used and have not been sold for up to two consecutive tax years. 


The registered owner of the property must be the developer. Homes must be actively marketed. You should check their active listings for sale and make sure they are the registered owner and developer. 

You purchased real estate at the end of a particular tax year, and the sale involved the transfer of a 100% interest in the property to an unrelated person or company. This excludes name changes, adding a second owner and removing a second owner. A land transfer deed is required as proof.

Owners who do not file the form by the deadline may file a late return but may be subject to a fine of at least $250. 


If your home has been classified as non-residential by your local authority and you think its status is incorrect, you can appeal. Property owners who want their tax returns assessed can use a two-step process. The first step is to file a complaint. The second step is to file an appeal if you disagree with the decision to file a complaint. 


You must still pay vacancy tax as specified on your invoice. If you do not pay your balance by the due date and no notice of appeal is filed, you will be required to pay tax along with any interest, applicable penalties and fees. The vacancy tax will come into force from 2021 and increase in 2024. 


If you are a home buyer and choose to leave your home empty, you may have to pay this tax. If you have questions about tax changes, contact us today.

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