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The real estate tax. Property tax is paid once a year, is 0.5–4.0% of the estimated value of the property and is used to maintain the city's infrastructure: roads, schools, etc.
You can find services for calculating this tax on official resources. For example, here is a calculator for property owners in Toronto. According to calculations, the owner of a home with an estimated value of $500,000 annually pays $2,900 in property tax.
The annual property tax for residents of the country can be reduced in two cases.
If you are a first-time home buyer in Canada, you will receive a $750 tax deduction for your first year of ownership.
From the amount of tax due, you can deduct expenses related to the reconstruction of housing (repairs, construction).
By the way, Canada is one of the few countries where there is no inheritance tax.
Also read:
Canadian Visa and How to Get It
How to Buy Real Estate in Canada
Profitability. According to the analytical publication Global Property Guide, the profit from renting out housing in major cities in Canada is 4-6%. For example, a spacious apartment with an area of 120 sq.m in the center of Montreal can cost $350,000, and rentinf cost will be $1,560 per month. Similar housing in Toronto will cost $1,130,000, and rent - $3,740.
Rental rates and property prices in Canada continue to rise despite the impact of the pandemic, as demand for local housing continues to grow.
Bids. The cost of short-term rent starts from $120 per day near the center of Toronto, in Montreal – from $70 .
What is interesting is that with a long-term lease, the owner cannot raise the fee by more than an annual percentage of inflation. For example, it was 2.5% in 2019, and this is the maximum increase that a home owner can apply. Also, the owners often include water and heating in the rental price.
Taxes. If you rent out a house, you must report your income to the tax department and pay tax on your net income once a year.
If you are a non-resident of Canada, the rate is 25%. The tax base is the net income from the delivery, minus the cost of housing maintenance and interest on the loan (these points will need to be specified in the declaration, so keep all the receipts about the costs).
If you are a resident or citizen of Canada, a progressive scale is applied, which at the federal level is 15-33%, depending on the amount of income.
In addition, each province has local income tax rates, which vary between 4% and 21% depending on income and place of residence. The current rates (in Canadian dollars) can be viewed on the government portal of Canada.
To calculate the income tax that you will have to pay, you need to sum up the provincial and federal tax rates that are relevant to your income level.
Interestingly, the BPA (basic personal amount) tax deduction, which currently amounts to $10,930, can be applied in any case, regardless of how much you earn. For example, if your annual income is $30,000, you can deduct $10,930 from it and not pay tax on this amount. And for the remainder, apply the current rate for your province.
How and when to pay. For individuals, declarations are accepted from February to the end of April by mail or through the personal account of the tax administration. For entrepreneurs and their families, the deadline for submission is June 15 of the year following the reporting year. You can rely on your own strength for the calculation, but it is often much easier to hire an accountant or buy a special program. You also need to pay in the specified period using the management details or via Internet banking.
After receiving the declaration and payment from the department, you are informed of the receipt and, if necessary, a recalculation, fine or tax refund is attached to this notification.
Benefits. Apply to residents of the country. Income tax is not levied:
Benefits are provided for pensioners, low-income families, citizens and residents who care for elderly parents; people who used paid medicine or purchased medicines at their own expense; disabled people, parents who pay for their child's education at their own expense; the unemployed.
Tax deductions apply:
Management companies in Canada take on a standard list of responsibilities: from looking after real estate in the absence of the owner to finding tenants, monitoring rent payments and utilities. The average rate is 8-10% of the rental income.
Market trends. Despite the pandemic, the real estate market in Canada is not going to stop. Until 2020, house price growth has been continuous for the past 15 years, averaging 10-11% per year. Demand remained stable due to the influx of tourists and foreign specialists.
Taxes. In the case of the sale of real estate, you need to pay capital gains tax, which is calculated from the amount of net profit. That is, the difference between the cost of buying and selling, minus all costs associated with the modernization and improvement of housing, loan costs, annual taxes, on the conclusion of the transaction.
The standard income tax rate is applied to the balance, which is 25% for foreigners, and for residents and citizens of Canada is calculated on a progressive scale (the sum of the federal and provincial).
There is a pleasant detail: you can sell real estate with the help of your representative – a citizen or resident of the country – by proxy. In some cases, this allows you to significantly reduce the tax.
Additional expenses. For the services of a lawyer you will have to pay about $700-800, for a technical inspection of the house you will give at least $300. The real estate agency charges 4-5% of the transaction amount for its services.
