Tax Changes Affecting Real Estate in 2024

Evelyn Jacks

The federal government will restrict the deductibility of rental income expenses where short term rental ventures fail to meet local regional by-laws starting in 2024; based on tax law passed on June 20, 2024.  However, there are also provincial tax consequences when it comes to real estate taxation in two provinces, that should be noted:  

British Columbia Real Estate Taxes

Anti-Flipping Tax.  A new, expensive anti-flipping tax will hit homeowners who profit within two years of acquiring a principal residence starting January 1, 2025. A 20% tax will be charged on the profits generated within one year of purchase.  This is phased down to 10% when the sale takes place after 18 months and then 0% when the home is owned for 2 or more years.    There are some exemptions; some of which require the filing of a return and some of which don’t, as per the B.C. government website:

Exemptions that require the filing of a BC Home Flipping Tax Return: 

• Life circumstance exemptions
• Exemptions for builders, developers, and building or renovating related activity
• Exemptions for property sales between related persons

Exemptions without filing a return

• Your property is in an exempt location
• You are an exempt entity
• You acquired the property as a beneficiary of a real estate investment trust
• You used your property exclusively for a commercial purpose

Short Term Rentals in B. C. Effective May 1, 2024, the Province has implemented a provincial principal residence requirement in some areas of the province which limits short-term rentals to the host’s principal residence plus one secondary suite or accessory dwelling unit on the same property.  For example, principal residence requirement applies to B&Bs, where they can operate if the owner of the B&B lives on the property.

The principal residence requirement applies across B.C. in municipalities with a population of 10,000 and over and smaller neighbouring communities. In addition, communities have the opportunity to opt-in annually.

There are some exemptions from the principal residence requirement which include certain communities, certain types of land and certain types of accommodation service providers. An example of these would be time share properties and home exchanges.

There are lists of different exemptions, and different rules pertaining to different areas of British Columbia depending on the municipality.  It is best to check with your municipality to ensure what rules will be in effect for the region each taxpayer with short term rental income may be subject to.

Manitoba Property Tax Breaks Changing

Starting in 2025, the School Tax Rebate and Education Property Tax Credit will be replaced by the new Homeowner’s Affordability Tax Credit of up to the lesser of $1500 and gross school tax on principal residences.    For properties with assessed values $285,000 and below it will eliminate education property taxes.  But given that more than half of Manitoba’s population lives in Winnipeg and the average price of housing in Winnipeg is over $325,000, most taxpayers will likely see an increase in taxation as a result when they file their 2025 tax returns.

As the $1500 credit applies to one principal residence only, cottage owners can also expect and increase in taxes.

For 2024 tax filings, the School Tax Rebate and Education Property Tax Credit will be the lesser of $350 and 50% of gross school tax.  This applies to principal residences only.

For more information about federal and provincial tax changes for the 2025 tax season including a line-by-line tax updated for professionals join us virtually on January 15 – in the comfort of home or office – at the next CE Summit.  Register now!