The worry about a tax on your principal residence started with an article in the Blacklock’s Reporter. It claims that the federal government is considering a home equity tax and that CMHC is spending $250,000 to research this initiative at the UBC School of Population.
Should you be concerned? Generation Squeeze, an advocacy group for younger Canadians which is involved in this study has stated that “ We need to make it so that no Canadian relies on gains in housing wealth to feel secure, and we need to rethink policies that, by encouraging the financialization of housing, push the cost to buy or rent a home even further out of reach.”
It seems that the CMHC is biased as well, when you consider what Evan Siddall, the chief executive of CMHC said: “Our ‘dream of home ownership’ is static and regressive. We need to call out the glorification of home ownership for the regressive canard that it is.”
Many articles are suggesting that the principal residence exemption be amended, or a new home equity tax, or wealth tax which may include principal residences be implemented.
If you are thinking of moving your home into your corporation as a pre-emptive measure, as some unqualified advisors have suggested, the result may be worse than any new legislation.
You incur a taxable benefit which is likely to be computed by reference to the cost of the property multiplied by an applicable rate of return. For example, if Holdco pays $1,000,000 for your property and Holdco earns an average of 6% on its investments, then 6% of $1,000,000 (or $60,000) would be the annual taxable benefit to be reported on your tax return. To add insult to injury, you also lose the principal residence exemption.
