Do you own a rental property? Then this post is for you!
Think it’s not for you? Read it anyways just to be sure…remember the subject line - $5k Penalty!
Let’s dive right into it!
If you own a residential rental property with 3 units or less then it’s time for a chat with your accountant to discuss whether you need to file the Underused Housing Tax Return .
Many are under the impression that this form is only required if there are foreign investors involved, or if there have been vacancies in the property. But that’s not entirely accurate.
Although most rental property owners will likely be exempt from this tax, it doesn’t necessarily mean that you are exempt from filing the form. Beware that the penalty for failing to file before the end of April (April 30th, to be exact) is a whopping $5k – PER property! So, if you are on title for ANY properties other than your primary residence, then it’s crucial to consult your accountant on this issue!
Now, who are the ones that are likely required to file?
- If the property is owned by a Canadian corporation, or if a Canadian corporation has any interest in it (this would include a Bare Trust situation where title is under your personal name but income is claimed under the corporation)
- If the ownership is a partnership (not necessarily a joint venture though, check with your accountant!)
- Any scenario where there is a trustee involved (for instance, if you are on your parent’s property title even though it’s not a rental – or your kid’s, for that matter (think financing) you may still be considered a trustee and may be required to file. Or, if you have a property where your spouse is the only one on the title, but you claim the income 50/50, then your spouse is a trustee in that scenario)
So what’s the big deal about filing this form?
Well there’s the fine…that $5k per property…plus the fact that if you are not exempt from this tax & you don’t file, then not only are you required to pay 1% of the fair market value of the property every year, but you’ll also rack up interest & penalties as well….so a fairly big deal, in my opinion!
This post is just the broad strokes, intended to alert you to an issue that you should look into for more information. It’s new, the form is very in-depth, & of course it’s not perfectly clear who needs to file it & who doesn’t…are we surprised that a new government initiative is confusing? No. Or that it’s up to “us” to figure it out or face steep penalties? Also No. But it is, so I urge you to have a conversation with your accountant, who hopefully specializes in investment real estate, to make sure that you’re compliant!
Sharing is caring so be sure to pass this along!
Until next time,
Additional Reading Here:
Research for THIS blog post alerted me to the upcoming UHT deadline - give it a read to see what other new government measures that will also NOT help with housing affordability
https://www.canada.ca/en/services/taxes/excise-taxes-duties-and-levies/underused-housing-tax.html#7
https://www.cpacanada.ca/en/news/canada/underused-housing-tax
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