Vacant Home Tax in Toronto What you need to know

Vacant Home Tax in Toronto: What you need to know

In February 2022, the City of Toronto introduced the City of Toronto Municipal Code Chapter 778, a significant piece of legislation addressing a pressing issue within the city—the problem of vacant residential properties. In this article, we will delve deeper into the key aspects of Toronto’s Vacant Home Tax, offering a comprehensive overview in plain language.

What is the Vacant Home Tax in Toronto?

What is Vacant Home Tax

A property is considered vacant if it was not used as the principal residence by the owner(s) or any permitted occupant(s) or was not occupied by tenants for six months or more during the previous calendar year. Properties may also be considered vacant if an owner fails to declare occupancy status as outlined in the bylaw.

  • Defining Vacant Units: Chapter 778 lays out a clear definition of what constitutes a vacant residential unit. A unit is considered vacant if it remains unoccupied for more than six months during a Taxation Year. Understanding the specific criteria for determining whether a property qualifies as vacant is crucial. A unit is considered occupied if occupied by primary residences or by tenants.
  • Tax Calculation: Property owners with vacant units, or units deemed vacant per the by-law’s criteria, are subject to a Vacant Home Tax. This tax amounts to one percent of the property’s current value assessment (CVA) each Taxation Year. Property owners are required to remit this tax payment by May 1st annually.

A Vacant Home Tax of one percent of the Current Value Assessment (CVA) will be levied on all Toronto residences declared in 2023, deemed or determined vacant for more than six months during the previous year. For example, if the CVA of your property is $1,000,000, the tax amount billed would be $10,000 (1% x $1,000,000). The tax is based on the property’s occupancy status for the previous year. For example, if the home is vacant in 2022, the tax will become payable in 2023.

The Vacant Home Tax was voted to be hiked to three percent of the CVA for the 2024 tax year.

  • Exemptions: It’s essential to know that the Vacant Home Tax by-law provides exemptions under certain circumstances. For instance, if your property is undergoing renovations, the principal resident is in a care facility, or the owner has passed away, you may qualify for an exemption. Exploring these exemptions is crucial if they apply to your situation.

According to Toronto’s Vacant Home Tax Website, a property may be left vacant and be exempt from the Vacant Home Tax if one of the following criteria is met:

Eligible ExemptionDescriptionSupporting Documentation 
Death of a registered ownerThe property was vacant for six months or more in the previous year due to the death of an owner.Copy of death certificate.
Repairs or renovationsThe vacant property is undergoing repairs or renovations, and all the following conditions have been met:
a) occupation and normal use of the vacant property is prevented by the repairs and renovations;
b) all necessary permits have been issued for the repairs and renovations;
c) the City’s Chief Building Official is of the opinion that the repairs or renovations are being actively carried out without unnecessary delay.
Description of the type of project preventing occupancy.Copy of building permits issued related to the repairs and renovations.
Principal resident is in careThe principal resident of the vacant property is in a hospital, long term or supportive care facility for at least six months during the taxation year. This exemption may be claimed for up to two consecutive taxation years.Signed letter from health care facility on letterhead.
Transfer of legal ownershipYou purchased your property with a closing in the taxation year being declared, and the sale involved a 100 per cent transfer of an interest in the property to an unrelated individual or corporation. This excludes name changes, adding a second owner and removing a second owner.Copy of land transfer deed.
Occupancy for full-time employmentThe vacant property is required for occupation for employment purposes for a total of at least six months in the taxation year, by its owner who has a principal residence outside of the Greater Toronto Area.Proof of residency outside of Greater Toronto Area.Signed letter from employer on company letterhead or employment contract.
Court orderThere is a court order in force which prohibits occupancy of the vacant property for at least six months of the taxation year.Copy of court order.
  • Annual Declarations: Property owners must make an annual declaration regarding the occupancy status of their units. Failing to comply with this requirement can result in your unit being designated as vacant, subjecting you to the Vacant Home Tax. Ensure you stay vigilant and submit your annual declaration on time.
  • Assessment and Collection: The City’s Chief Financial Officer is responsible for assessing properties and issuing tax notices to property owners. In some instances, supplementary assessments and reassessments may be conducted. Late payments may accrue interest and additional fees.
  • Complaints and Appeals: Property owners can dispute their tax assessments if they disagree with the findings. This process involves submitting a notice of complaint and, if necessary, an appeal request to the Appellate Authority. Ensuring your assessment is accurate is vital in avoiding unnecessary tax burdens.
  • Penalties and Fines: The by-law outlines various offences related to non-compliance, including providing false information or attempting to evade the Vacant Home Tax. Depending on the nature of the offence, fines can range from $250 to $10,000, with the possibility of special fines.
  • Recovery of Tax: Unpaid Vacant Home Taxes can be added to your property tax roll and collected similarly to regular property taxes. In cases of non-payment, legal actions may be taken to recover the outstanding amounts.
  • Audit and Inspection: The by-law allows for the audit and inspection of records and documents related to occupancy and exemptions. Owners must retain relevant records for a minimum of three years.

How To Declare

The City offers a secure online portal for submitting your declaration, which is quick and easy to use. Completing your declaration online can avoid errors and readability issues with handwritten declarations. However, homeowners can download a PDF of the form to fill out and submit.
To complete your annual declaration, you will need two important pieces of information: the 21-digit assessment roll number and the customer number from your property tax bill or account statement.

Summary

Toronto’s Vacant Home Tax addresses the issue of vacant residential properties within the city. It establishes transparent rules and regulations for property owners, from defining vacancy criteria to tax calculation and available exemptions. Whether you are a homeowner or an investor in Toronto, comprehending and complying with this by-law is essential. Doing so ensures adherence to local regulations and contributes to the city’s efforts in tackling housing challenges by encouraging the responsible occupancy of residential properties.

If you plan to buy a property in Toronto, seeking legal advice is essential to ensure you know all the current rules and regulations. A Toronto real estate lawyer can guide and advise you before you make a purchase decision and help you understand the legal implications of vacant home tax.

The information provided above is of a general nature and should not be considered legal advice. Every transaction or circumstance is unique, and obtaining specific legal advice is necessary to address your particular requirements. Therefore, if you have any legal questions, it is recommended that you consult with a lawyer.

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