Whenever you buy real estate, the province charges you property transfer tax or land transfer tax on the transaction. This is one of several closing costs you’ll need to pay addition to the down payment, so it’s important for buyers to understand how to calculate these costs and plan accordingly so they won’t come up short at the closing table.

Calculating B.C.’s transfer tax

British Columbia charges property transfer tax at 1 per cent for the first $200,000 of the sale price and 2 per cent for any portion greater than $200,000. So, if you were buying a $300,000 home, your transfer tax would be $4,000 ($2,000 on the first $200,000 and $2,000 on the remaining $100,000). Transfer tax is a one-time payment, while property taxes are paid annually.

First-time home-buyers tax exemption

First-time home-buyers in B.C. may be eligible for a reduction or elimination of property transfer taxes. To qualify, you must be a Canadian citizen or permanent resident and must have never owned an interest in a principal residence anywhere in the world at any time. You also must have lived in B.C. for 12 consecutive months immediately before the date you register the property or filed at least 2 income tax returns as a B.C. resident in the last 6 years. The property must be located in B.C. and used as your primary residence. The full exemption applies to properties with a fair market value of $475,000 or less, while the partial exemption applies to properties with a fair market value under $500,000 or if it has another building on the property other than the primary residence. This table shows the amount of the partial exemption based on the home’s value. (Ontario, Prince Edward Island and the City of Toronto also offer land transfer tax rebates for first-time homebuyers.)

If you’re buying with someone else (perhaps a spouse) who has owned real estate in the past, but you haven’t, you could structure the deal so that you initially own a larger share of the property to maximize your exemption (for instance, you could own 99 per cent, while the other person owns 1 per cent and you change to 50/50 ownership later on).

Provinces other than British Columbia charge property transfer taxes at different rates, although it’s typically a per cent of the property’s purchase price. Alberta and Saskatchewan instead levy a much smaller transfer fee. Talk to your real estate lawyer or accountant if you’re unsure of how to calculate transfer tax or whether it applies to your situation.