The deadline to declare your residency to avoid Ottawa’s new vacant unit tax is approaching. Home owners have until March 16, 2023 to submit their declarations or face a 1% increase on their property taxes.

The tax was approved by city council in March of 2022 with support from the Hintonburg Community Association. The purpose of the tax is to discourage people from investing in real estate and leaving buildings unoccupied.

Similar taxes are rolling out in Toronto this year and in Hamilton in 2024. Vancouver implemented a comparable tax in 2017. And it was effective. From 2017 to 2020, the number of vacant homes there decreased by 30%.

The tax roll-out has not been trouble-free. Some Ottawa residents are upset with the process of submitting a declaration. They say the city should have used utility bills to determine residency instead. Home owners who speak English as a second language, or with diverse abilities could be unfavourably affected.

As of January 9, 25% of Ottawa’s homeowners had submitted their declarations. With less than one month to go, city officials are likely crossing their fingers that the rest are submitted in good time.

Who is Exempt?

If you live in the home you own, or rent out a property, you are exempt from the tax. Owners whose property was vacant more than 184 days in 2022 will be subject to it. But the city does allow some exceptions including residing in a care facility, sale of the home, construction or renovation, and death.

For more information, check the city’s website.

How to Submit Your Declaration

Residents should have received two letters in the mail notifying them of the need to submit a declaration. You can declare your residency by returning the included form by mail, or submit the information online.

Late Declarations

This year, late fees have been waived. Beginning next year, there will be a $250 fine for missing the deadline.

Owners of homes deemed vacant as of April 30 will be taxed an additional 1%. The amount will be added to their final tax bill, which will be mailed out in June.

Tips for First-Time Home Buyers

If you are thinking of buying a home this year, chances are this tax won’t affect you. But there are a couple of things to look out for.

Did the Owner Declare Residency?

If a home sale closes between January 1 and April 30 of this year, it is the seller’s responsibility to declare residency.

Before closing on a home sale, buyers (and their legal professionals) should make sure the owner declared residency and the extra taxes won’t be charged. If the owner skipped this step, you could be on the hook for extra property taxes this year.

Is the Property Vacant?

If you buy a home that was unoccupied last year, the tax could be added to this year’s property taxes. Check in with a legal professional before closing the deal to find out if there are ways to avoid the extra fees if you intend to live in the home.

The Takeaway

New taxes and procedures always take some getting used to, but for most homeowners, this new tax will cost them nothing more than a little time to submit their declaration.

Ultimately, it may help the housing market in Ottawa by making more units available to people who want them.

If you are thinking of buying a home this year, drop us a line. It’s never too early to discuss your mortgage options.