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Taxes Affecting Residential Real Estate Transactions

By sedoo

Nobody likes paying taxes and everyone likes to minimize any taxes payable. On every residential real estate transaction, whether a purchase, a sale or an assignment, there are various municipal, provincial and federal taxes that might be applicable and must be considered. This is all in addition to the property taxes that are payable to the municipality and must be adjusted for on every transaction.

 

When we act for Buyers of a residential property we have to consider the applicability of Harmonized Sales Tax, Provincial Land Transfer Tax, Municipal Land Transfer Tax, Income Tax (Section 116 Withholding Tax and RRSP Home Buyers Plan), and Non-Resident Speculation Tax.

 

When we act for Sellers of a residential property we have to consider the applicability of Harmonized Sales Tax, Income Tax (Section 116 Withholding Tax and Capital Gains).

 

When we act for Assignors or Assignees on assignments of a residential property we have to consider the applicability of Harmonized Sales Tax, Provincial Land Transfer Tax, Municipal Land Transfer Tax, Income Tax (Section 116 Withholding Tax and Capital Gains).

 

Even in the most seemingly straight forward residential real estate transaction there are many factors that determine which taxes have to be considered, for example, new build v. resale, jurisdiction of the property, residential v. mixed residential and commercial, number of residential units, citizenship, residency, primary use, parties (personal, corporate, trusts), age, previous ownership, intention of the parties, marital status, etc.

 

As a result, it is essential to consult with your real estate lawyer to determine which taxes may affect you and your transaction.

 

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David H. Korman is a Partner at Kormans LLP. His practice areas include residential and commercial real estate transactions, commercial leasing and private and institutional lending. You can reach David at dkorman@kormans.ca.

All blog entries are for your reading pleasure only and are not posted to provide legal advice. For your matter, we encourage you to consult with a lawyer to review and discuss your specific facts and circumstances.