Navigating the Toronto Vacant Home Tax

Ensuring housing affordability has become a critical issue of concern for Federal, Provincial and Municipal governments in Canada. In an effort to address this issue, the City of Toronto implemented a new Toronto Vacant Home Tax. Under this new tax, Toronto homeowners with vacant properties will have to pay an additional Vacant Home Tax on their home, effective January 1, 2022.

This new policy is the result of Consultation on the Underused Housing Tax with interested members of the public from August 2021 to December 2021, alongside the Department of Finance, and was announced in Budget 2021 by the Government of Canada. During the December 2021 meeting, City Council amended the City of Toronto Municipal Code and added Chapter 778, Taxation, Vacant Home Tax.

What is the New Toronto Vacant Home Tax?

The Toronto Vacant Home Tax (VHT) is intended to incentivize owners to rent or sell their empty homes, and thereby increase the supply of affordable housing in Toronto. It will be levied at 1% of the property's current value assessment for the year the home is vacant. The tax is based on the property's occupancy status for the previous year. For example, if a vacant home is assessed at $1,200,000 in 2022, the owner will be subject to a $12,000 annual tax that will become payable in 2023. The City will use the funds from the Vacant Home Tax to fund initiatives that will help alleviate the housing shortage in Toronto, such as providing additional affordable housing.

What is considered a vacant home?

A vacant home is defined as a residential property that has been unoccupied and not used as a principal residence for more than six months in the previous calendar year. If a home is left unoccupied for more than six months after January 1, 2022, the owner will be subject to the vacant home tax the following year. The Toronto Vacant Home Tax also applies to non-residents and non-Canadian property or real estate owners. Owners who rent out their vacant homes are exempt from this tax. This provides an incentive for owners to find tenants and helps ensure more homes are available for people in need.​ ​

What are the exemptions for the Toronto Vacant Home Tax?

There are a few eligible exemptions for the Toronto Vacant Home Tax, which must be noted on the declaration and supported by documentation. If you meet the following criteria, you will be exempt from Vacant Home Tax:

• Property was vacant for six months or more in the previous year due to the death of an owner.
• Property is unoccupied because its undergoing renovations or repairs and all the following conditions have been met.
  1. normal occupation is prevented for at least six months of the year
  2. all requisite permits have been issued for the repairs and renovations
  3. the City's Chief Building Official believes the work is being carried out “without unnecessary delay”.
• Property was vacant due to the principal resident residing in hospital, long-term care home, etc. for at least six months of the year. This exemption can be claimed for up to two consecutive taxation years.
• Property was vacant for six months or more due to the transfer of legal ownership to an arm’s length buyer.
• Property is vacant because the property is required for occupation for employment purposes for at least six months of the year, by its owner who has a principal residence outside the Greater Toronto Area.
• Property was vacant due to a court order which prohibits occupancy for at least six months of the taxation year.

How to make the declaration?

To ensure compliance with the Toronto Vacant Home Tax, all residential property owners must make a declaration of occupancy status. The City of Toronto has set up an online declaration portal that will open in mid-December 2022. The deadline to submit the declaration is February 2023 for the 2022 taxation year. Owners of residential properties that have remained unoccupied for six consecutive months or more during the taxation year, and without an eligible exemption, will be required to pay the Toronto Vacant Home Tax. A Vacant Home Tax Notice will be issued to the property owners in March/April, with payment due on May 1.

If the owner fails to make the annual declaration and/or provide supporting documentation by the deadline, the residential properties will be deemed vacant. A fine of $250 to $10,000 may be imposed for failure to declare or making a false declaration. In addition, any overdue Vacant Home Tax amount will be subject to interest until the amount is paid.

Conclusion

It is essential that all property owners in Toronto comply with the Vacant Home Tax and make their declarations on time. This tax will help ensure that more homes are available for people in need, as well as generate revenue to fund important initiatives such as providing additional affordable housing.

If you are looking for an accountant in Hamilton for professional guidance or have any questions about the new Toronto Vacant Home Tax and eligible exemptions, contact us today. We are a full-service accounting firm in Hamilton that have experienced tax accountants that can meet all your tax needs. ensure your disclosure is handled correctly.

If you want to learn more about other tax and accounting topics, explore the rest of our blog!

Disclaimer

The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting/tax professionals. NBG Chartered Professional Accountant Professional Corporation will not be held liable for any problems that arise from the usage of the information provided on this page.