Homeownership is a life-changing decision, if you are a homeowner or looking to be an owner of a home, you need to pay heed to an ugly proposition that has been peeping since the prices of the home are rising. The proposition states to have a tax on the capital gains on the selling of the main residency (i.e., the primary place, you live in)!
It has been agreed by most that if approved, it would be the most unpopular and despised tax, but simultaneously it is suggested that the tax-free gains made by current sellers are worth discussing.
Currently, the selling of the main residence is spared or exempted from the capital gains tax. This is reasonable and logical due to many reasons, foremost being having your own home gives stability and security, which is the linchpin of retirement planning. Keeping this in mind, the federal government has refused to change the current policy, but despite this proposition or ideas like these keep rearing their ugly head.
“A capital gains tax is a type of tax that needs to be paid on the profits or gains earned on the sale of an asset like movable property, immovable property, shares, funds, etc. In Canada, this tax is exempted on sale of primary residence”
It is true that no one likes or enjoys taxes, but this is a loophole in the tax code which motivates Canadians to invest or reserve more money into housing or real estate. Housing prices have ascended up to 270% since 2000. It has been estimated by the Department of Finance that by skipping taxes on the selling of main residency, the Government of Canada has lost approx. $7.1 billion alone this year. On the contrary, this tax relief has been beneficial for those with massive finances as the gain of $200,000 on the sale of a $300,000 home is tax-free, and massive profit of $10-million on the sale of a $15-million home is also tax-free.
Everyone has a different perception of this idea, while some suggest that If homeownership didn’t involve such attractive and beneficial schemes, people would shift to staying on rent and would not be motivated to buy their own home, thereby fewer Canadians would invest their money in homeownership. Whereas some feel that If the government would attempt to adopt and approve this tax, they will have to face a conflagration of community’s criticism from exasperated homeowners.
While some who are in favor of the tax say that even though the consequences can be dire, this doesn’t reduce the fact that it is worth discussing and pursuing as they believe bigger repercussions imply a better idea. They further believe that this a medicine to cure the red-hot housing markets but as per Toronto Regional Real Estate Board adequate supply of houses for sale should solve the problem of housing affordability rather than an extreme step like imposing taxes on the sale.
It is worth remembering that homeowners already are thumped with continuous taxes like land transfer tax, property tax which costs thousands of dollars to them. Burdening them with more taxes like capital gain tax would mean crushing them with unnecessary expenses.
What do you think? If you need more updates, strategies or free guidance in making financial decisions or on taxes related to the purchase or selling of the house, talk to our experts at My Mortgage Consultant!