Looking to Increase Current Cash Flow?
The Financialist • Issue 98 • July 2008
BY MARK NEUFELD BA CFP
If so, you may be interested in the British Columbia Property Tax Deferment Program - a loan program that allows home owners to defer payment of annual municipal property taxes.
To qualify, you must:
• be the registered owner(s) of the home
• be 55 years of age or older or a surviving spouse (any age) or a person with disabilities as defined in the Regulations to the Land Tax Deferment Act
• be a Canadian citizen or permanent resident under the Immigration Act
• have lived in British Columbia for at least one year immediately prior to applying
• apply for the home in which you live
• have a minimum equity of 25% in your home based on assessed values as determined by BC Assessment
• have a current fire insurance policy on your home
Please note that only one spouse must be 55 years of age or older (or turning 55 in the year of application) where the home is registered in both names.
WHAT CAN BE DEFERRED?
After deducting the home owner grant, all or part of the unpaid balance of your home’s property taxes for the current year can be deferred. If you rent out part of your home, you are only permitted to defer property taxes for that part of the home in which you are living.
WHAT HOMES DO NOT QUALIFY?
Second residences such as summer cottages or rental properties do not qualify.
HOW LONG CAN I DEFER MY PROPERTY TAXES?
Property taxes can be deferred for as long as you own and live in your home. The deferred property taxes must be fully repaid, with interest (a) before your home can be legally transferred to a new owner (other than to a surviving spouse) or (b) upon the death of the agreement holder(s).
HOW DO I APPLY?
After you receive your annual property tax notice, contact your local municipality for further details.
HOW MUCH DOES IT COST?
If your application is approved, a onetime administration fee of $60 is added to your new tax deferment account. The cost for subsequent renewals is $10 per year. Simple interest (not compound interest) is charged on your deferment account. The rate is set every six months and it currently stands at 4.00%. With a loan, simple interest is attractive because you don’t end up paying “interest on interest”.
SPECIAL CONSIDERATIONS?
If you are considering taking out a line of credit secured against the equity in your home, we generally recommend having this in place before deferring your property taxes. Otherwise, if you put in place a home equity line of credit after deferring your property taxes, you will be required to pay your deferment account in full. Any title changes after deferment (other than to a surviving spouse) require repayment of your deferment account.
SHOULD I PROCEED?
Feel free to contact your financial advisor to discuss if the British Columbia Property Tax Deferment Program is an option you should consider.