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Understanding Taxes on the Purchase and Sale of Your House


purchase taxes

Buying your first home is an exciting time in life. It’s easy to get caught up in the excitement of exploring houses, and picking that first one. Before making that decision however, consider those extra costs that everyone dreads, and yet can easily overlook… taxes.

Taxes on House Purchases

Two taxes that can apply on the purchase of a house are Goods and Services Tax (“GST”) and Property Transfer Tax (“PTT”). On your first home purchase, these taxes won’t generally apply. Before assuming this however, it is best to understand how and in what situations these taxes would apply.

GST applies on the purchase of housing, with an exemption available on the purchase of used residential housing. This means if you’re buying a newly built house GST will apply at 5%. For new house purchases, a GST rebate can be available equaling up to 36% of the GST paid. This rebate is maximized for houses with a value of $350,000, and gradually decreases as values approach $450,000.

PTT generally applies on the purchase of houses at a rate of 1% on the first $100,000 of value and 2% on the remaining value. An exemption from PTTis available to first time home buyers, provided:

  • The house is in BC
  • The house value is under $475,000 (an exemption is still available up to $500,000, but is reduced)
  • The buyers haven’t owned a house as a principal residence before (where there are multiple buyers, even if one has owned a principal residence before, the other buyers can still claim the exemption on their portion of the house), and
  • The size of the lot is one-half hectares or smaller

How the Principal Residence Exemption Applies

Generally, when you sell a house, one half of the gain on its’ sale is included in your income, and is subject to personal tax. An exemption is available from all or a portion of the tax where the house was lived in as your principal residence.

Various situations complicate the principal residence exemption, including the following:

  • Properties greater than one-half hectare
  • Ownership of multiple houses at the same time
  • Buying houses with the intention of selling them at a profit over a relatively short period of time
  • Renting of a house after living in it, and
  •  Becoming a non-resident of Canada and later selling the house.

Know What Taxes Could Apply to Your House

As you can see there are a variety of taxes to consider both on the purchase and sale of a home. When taxes are not adequately considered, they can be a significant blow to your budget. Even worse, if taxes are overlooked they can result in unnecessary penalties and interest.

The above are general comments about complicated taxes. We recommend working with your realtor to fully understand what taxes will apply on your home purchase, and contacting your professional advisor before selling or changing the use of your home.


Gprdon Guild Chartered Professional Accountant PentictonWritten by Gordon Guild – Manager, Tax Department
White Kennedy LLP – Chartered Professional Accountants


The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.