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There are two taxes—one city and one federal—for the whole issue of vacant or underused residential properties. This is a policy by both levels of government to make residences available to Canadians.

For the city, all residential owners in Toronto received a yellow notice called the “Vacant Home Tax” in December for filing online their occupancy status. If you don't file, the city will assess a tax of 1% of the assessed value of the property, and you will have to pay the whole tax in 3 equal installments (May, June, and July), and if you don't, they will be applied with 1.25% penalties to your property taxes.

For federal, the new tax return is called the Underused Housing Tax Return. It is due at the end of every April, starting this year, 2022. This does not apply to Canadian individuals who are citizens or permanent residents of Canada and have residential properties. However, if you have a corporation, are a member of a partnership, or are a trustee of a trust (except for a deceased person), and the corporation, partnership, or trust owns a property that is residential or has residential units, this return must be filed, or face minimum penalties of $10,000 for corporations and $5000 for each individual of a partnership or trustee, if not filed. I say minimum because if you do not file the return in the following year as well, extra penalties will be based on the underused housing tax, which is, lo and behold, 1% of the assessed value of the residential property, just like the city vacant tax.

As you can see, both levels of government have all bases covered to deal with underused residences, and one can argue, at a huge expense to some Canadians. Residential lease agreements have to be in place. If you can't rent out your residences, there are exemptions that apply. As mentioned in my last Tax Season Update, please consult with me on any of this.

Something to vent about around the dinner table……


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