The Vacant Home Tax (VHT)
In an effort to encourage property owners to increase rental supply, governments across the country have explored implementing a Vacant Home Tax (VHT). Most notably, the municipalities of Toronto and Ottawa have taken steps to implement this tax at the municipal level starting in 2022. Hamilton will have the tax in 2023, with tax due in 2024.
Many other local governments have expressed interest in implementing a VHT at the municipal level, including those in the regions of Peel, York, Halton, and Durham. It is therefore important to keep up to date with news from your municipality to ensure you are informed of your obligations.
The VHT is an annual tax that will be levied on vacant properties starting in 2022, with tax payable beginning in 2023. Under this program, all residential property owners are required to declare the status of their property(s) each year, even if they live there and the property is not vacant. Homeowners may delegate the filing of the declaration to a third party.
If a declaration is not made for a property, the property will be deemed vacant by the municipality and subject to the VHT. In addition, fines for not filing a declaration or making false or deceptive statements range from $250 to $10,000 for each instance. It is therefore paramount that a declaration be filed on time with complete and accurate information.
The VHT is calculated as 1% of the assessed value of the property. This means that a vacant property with a value of $1M would attract VHT of $10,000 in a year. As 2022 is the first year the tax applies, the amount would be payable in 2023. The City of Toronto has set the declaration deadline as February 2, 2023 and a payment deadline of May 1, 2023. Property owners will receive a Vacant Homes Tax Notice in March or April 2023.
The declaration includes different types of property status declarations which would be selected at the time of filing depending on your circumstances. For example, the City of Toronto includes declarations such as:
- Occupied as principal residence of homeowner,
- Occupied as principal resident of a permitted occupant,
- Occupied as a tenanted property,
- Vacant with an eligible exemption, and
- Vacant or deemed vacant / determined vacant
Only properties deemed or determined vacant are subject to the VHT according to the information published by the city. In general, properties must be occupied for six months or more throughout the year to avoid being subject to the vacant homes tax.
Properties may be exempt from the VHT in Toronto if:
- The registered owner dies in the year,
- There are repairs or renovations which prevent occupation of the property,
- The principal resident is in a hospital, long term, or supportive care facility for up to six months,
- There is a transfer of legal ownership to an unrelated person,
- The unit is required for occupation for at least six months in the taxation year for employment purposes by its owner who has a principal residence outside the Greater Toronto Area, or
- There is a court order prohibiting occupancy of the property for at least six months.
As the VHT is being rolled out by different municipalities, the rules may differ by municipality. For example, the declaration deadline for the City of Ottawa is March 16, 2023. Ottawa adds the VHT to your final tax bill due in June. It is important to refer to information published by the municipality governing your property for exact details of this tax.
We encourage you to reach out to us if you own residential real estate for further information. Please be advised that we will not be filing this declaration unless requested.