The federal government is intensifying its efforts to curb the practice of house flipping. On August 9, 2022, draft legislation was introduced to implement the government’s new anti-flipping regulations, scheduled to come into force in January 2023.
In official government documents, flipping is defined as “the act of acquiring real estate with the purpose of selling it within a short timeframe to generate a profit.”
The government’s objective with this new legislation, commonly referred to as the “anti-flipping tax,” is to further mitigate speculative demand and contribute to the moderation of the excessive price growth witnessed in recent years.
Selling your primary residence does not result in any tax obligations. Nonetheless, there have been instances where individuals exploited this exemption by rapidly purchasing and selling properties to make a profit. In response to this, the Canadian government has implemented new regulations. According to the anti-flipping tax rule, if you sell a property within one year of acquiring it, any profit will be subject to taxation as business income.
Who may be exempt?
Your transaction could be excluded from this treatment if you meet one of the following criteria:
- Taxpayer died
- A related person joining the household
- Divorce/separation
- Personal safety concern as a result of owning the property
- Illness or disability
- Moving for a qualified employment reason
- Being let go from your employment
- Bankruptcy/insolvency
- Destruction/expropriation of your property
Every situation can be specific, so this blog post should not be relied upon as legal, financial, or tax advice. We strongly encourage you to speak with a qualified mortgage broker, accountant, and real estate agent to determine specific implications, if any, to your situation.
