As of January 1, 2022, a significant shift in Canada's real estate landscape occurred with the implementation of the Underused Housing Tax (UHT). This annual tax, set at 1%, targets vacant or underused residential properties across the country. Understanding the nuances of the UHT is crucial for both property owners and appraisers alike.
Who Bears the Underused Housing Tax Burden?
The UHT primarily affects property owners considered "affected owners" of residential properties in Canada as of December 31 each year. However, not all owners face the same obligations. Two categories delineate property owners: excluded owners and affected owners.
Excluded Owners: This group carries no obligations or liabilities under the Underused Housing Tax Act.
Affected Owners: Individuals falling into this category must file a UHT return for each residential property owned in Canada on December 31. Even if an exemption is claimed, affected owners are required to submit a UHT return for the calendar year.
For a comprehensive list of excluded owners, affected owners, available exemptions, and additional details, the Government of Canada's UHT page provides a valuable resource.
Calculating Underused Housing Tax for Consumers
If you find yourself obliged to calculate monies owing for UHT, a straightforward method is employed. Multiply the value of your residential property by the 1% tax rate, and then further multiply the result by your ownership percentage of the property. The Canadian Revenue Agency (CRA) serves as the source for this calculation.
When determining the value of a residential property, two options are available: using its taxable value or its fair market value (FMV). Opting for the FMV, which involves informing the CRA, allows property owners to benefit from an independent third-party opinion of value. Accredited members of the Appraisal Institute of Canada (AIC), known as AIC Professional Appraisers, hold recognition from the CRA as accredited, professional real estate appraisers for UHT purposes.
Underused Housing Tax Considerations for Appraisers
For appraisers, the introduction of the UHT presents opportunities and responsibilities. If a property owner is not claiming an exemption, a calculation of monies owing is required for the calendar year. This offers a chance for AIC Members to play a crucial role. Affected owners can elect to use the FMV of a residential property for UHT calculations, as mandated by the CRA.
To determine FMV, an appraisal of the property must be completed by an accredited, professional real estate appraiser operating at arm’s length from the owner. AIC Professional Appraisers, with designations such as AACI, P.App., CRA, are recognized by the CRA for this purpose.
AIC remains committed to promoting and advocating on behalf of its Members. The goal is to ensure that AIC Professional Appraisers maintain their position as the trusted professionals of choice for real property valuation, advisory, and consulting services throughout Canada.
As the real estate landscape evolves with new taxation measures, AIC continues to stand as a beacon of expertise, providing clarity and support for property owners and appraisers navigating the intricacies of the Underused Housing Tax.
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