Are you considering a move to Nanaimo in the near future?
Before you start looking for real estate in one of the hottest markets in British Columbia, it is important to understand the ins and outs of real estate and property-related taxes in the area.
These taxes will differ from other markets like Vancouver and Victoria, and in some ways, this can be an advantage for real estate investors and homeowners alike!
As you read through this guide, keep in mind that we are sharing publicly available tax advice to keep you informed.
Talk to a tax professional to know the exact details of Nanaimo real estate taxes.
Property Tax in Nanaimo
This is considered the most important real estate-related tax for those buying property in BC.
The City of Nanaimo charges this tax to fund schools, firefighting, police, road construction, and many other public services.
Property tax is calculated using the “assessed value” of your property.
BC Assessment calculates the value of your property every year. There are systems in place to prevent large increases in property value from resulting in similarly large property tax increases.
How does this work? Your property taxes are tied to how the assessed value of your property has changed relative to the average change of your property tax.
Here’s a video to explain:
When you are looking at getting a mortgage, remember that many lenders will include your property taxes in your mortgage payments so you don’t need to deal with one large tax bill every year.
Provincial Property Transfer Tax (PTT)
Looking to purchase property from a seller? You will need to pay a one-time provincial property transfer tax on the purchase unless you qualify for an exemption.
This tax ranges from 1-3% of the fair market value. However, there are many situations where you can avoid it, such as:
- The property is a new build or newly subdivided property (in this case you pay GST instead of PTT).
- You are a first-time home buyer.
- You are transferring property within your family.
- The property is worth under $525,000.
- Mobile and manufactured homes properties where you don’t own the land.
The current property transfer tax rates are:
- 1% of fair market value up to $200,000
- 2% of fair market value greater than $200,000 and up to and including $2,000,000.
- 3% of fair market value greater than $2,000,000.
- An additional 2% on residential property over $3,000,000 (with exemptions for mixed class properties and farm class properties).
Speak to a legal professional to find out how you could potentially avoid the PTT. This could change the kinds of properties you consider when you start looking.
Foreign Buyers Tax
The much-publicised provincial foreign buyers tax applies to foreign nationals, taxable trustees, and foreign corporations.
This tax does not apply across the entire province of British Columbia, instead, it is focused on the Capital Region District (Greater Victoria), Kelowna, Vancouver, and the Regional District of Nanaimo (including Qualicum Beach, Lantzville, and other communities in the area.)
In fact, recent comments from B.C.’s finance minister suggest that this tax could be coming to more communities soon to fight speculation and empty homes.
For international buyers, a 20% tax on the fair market value of the buyer’s proportionate share of the property applies.
Look for changes in the Additional Property Transfer Tax for Foreign Entities & Taxable Trustees (the official name of this tax) in the news in the coming months to ensure you are prepared for additional costs.
Speculation and Vacancy Tax
Another recent addition, this tax was brought in by the provincial government to cut down on vacant properties.
In Nanaimo and the Capital Region District, this is a significant problem, since both rental and housing inventory is low.
Owners are required to declare how they will use their property, and any full-time residents or those who rent out for at least 6 months of the year are exempt from the tax.
A tax rate of 0.5% of the assessed value of the home is paid annually, and this rate increases to 2% for foreign nationals.
It is important to know that this tax only applies to the City of Nanaimo and the City of Lantzville, meaning many areas of the Nanaimo area are exempt entirely.
Find out more about the speculation and vacancy tax (including exemptions) on the BC Government website.
Goods and Services Tax (GST)
The provincial GST rate of 5% applies to the purchase price of a property and is due immediately after a sale.
However, keep in mind that GST usually only applies to new builds, vacant land, short-term rental properties, and properties with titles newly registered under the Land Title and Survey Authority (LTSA).
Inquire with a tax professional about whether you will need to pay GST. However, keep in mind you will likely be more concerned with property tax and property transfer taxes.
Recent Changes to Nanaimo Property Tax
In May of 2022, a property tax increase of six percent was announced by the city of Nanaimo.
This tax increase included a five percent general property tax increase and a one percent annual increase for general asset management.
The city claims that this property tax increase results in approximately $139 more in property taxes for a typical household.
Nanaimo Real Estate Taxes in a Nutshell
Although Nanaimo has been tied into several recent new taxes levied by the provincial government, it is still a favourable place to buy and sell property in BC.
As we mentioned several times in this article, be sure to consult with a tax professional like a tax attorney or CPA. The Nanaimo real estate tax landscape is constantly changing, and you need to stay informed.
Check out our posts on the real costs of buying a home and the benefits of reduced debt for more insight into real estate finance.
Once you are confident your tax questions have been answered, reach out to Jeff King for expertise in buying and selling in the Nanaimo area.