BC vacancy tax vs Canada resident, how to choose to save tax?

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ilysm
Posts: 14
Joined: Sat Feb 27, 2021 9:44 pm

BC vacancy tax vs Canada resident, how to choose to save tax?

Post by ilysm »

Hi, my wife and I bought a home in BC Canada in late 2020. We got Canada PR 2 years ago but never relocate here. We plan to live separately in Canada (wife) and US (me) in the next few years until she get the Canada citizenship. If I continue to work in US as a non-resident in Canada, and my wife as resident in Canada, from the website below, am I right to say that we would need to pay the vacancy tax for our BC home, as a satellite family?

If I file tax to Canada as a resident in the next few years (although my income is from US with family tie in Canada), will we be able to waive the BC vacancy tax?

Looks like we are in a dilemma that I should decide, either be a Canada resident to pay income tax to CRA, or to be a non-resident to pay vacancy tax to CRA, right? Our BC home is around 1 million Canadian dollar, with 2% vacancy tax, we need to pay 20K per year. My income will be over 200K USD soon, so I expect that I would need to pay tens of thousands of income tax per year as well (considering WA has no state tax, and US has lower tax rate than Canada). Anyone who has the same experience like a satellite family and get any idea on how we can save more taxes? which option is better?

Thanks very much for the advices from nelsona and anyone else!



https://www2.gov.bc.ca/gov/content/taxe ... on-divorce
1. Principal residence exemptions
Generally, an owner is exempt from the tax if the residential property is their principal residence. People who have multiple homes can only claim the principal residence exemption on the home they live in for the longest period in the calendar year.

Spouses cannot claim two different principal residence exemptions unless specific situations apply, such as spouses living apart for work or medical reasons or because of recent separation or divorce.

To be eligible for a principal residence-related exemption, an owner must be a Canadian citizen or permanent resident of Canada who’s a B.C. resident for income tax purposes and isn’t part of a satellite family.
ilysm
Posts: 14
Joined: Sat Feb 27, 2021 9:44 pm

Re: BC vacancy tax vs Canada resident, how to choose to save tax?

Post by ilysm »

Anyone who has the satellites family? How do you deal with the tax? Any experience would be appreciated. Thanks very much
elgoog
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Joined: Thu Sep 19, 2019 9:40 pm

Re: BC vacancy tax vs Canada resident, how to choose to save tax?

Post by elgoog »

I am in the exact same boat. Here is what I can say:

1. If you both plan on living in the US, you can try and rent out your place and this will also help avoid the vacancy tax. Also, would https://www2.gov.bc.ca/gov/content/taxe ... ter-spouse not apply to your situation?

2. Regarding YOUR residency, if you plan to stay in the US, you will become a US resident when you meet the SPT. At that point, you could be considered a deemed non-resident even if you have significant residential ties.

See https://www.canada.ca/en/revenue-agency ... tatus.html -
If you established ties in a country that Canada has a tax treaty with and you are considered a resident of that country, but you are otherwise a factual resident of Canada, meaning you maintain significant residential ties with Canada, you may be considered a deemed non-resident of Canada. The same rules apply to deemed non-residents as non-residents of Canada

When you become a Canada non-resident, you no longer pay tax in Canada.
nelsona
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Re: BC vacancy tax vs Canada resident, how to choose to save tax?

Post by nelsona »

And if you move to US, even with ties in canada, as long as you (a) outweigh those ties with US ties and (b) EVENTUALLY meet SPT, you are considered as having left Canada the day you moved; ie. you do not have to wait to have met SPT in order to establish the departure date from Canada.
I am taking my usual break from this site until May. Always too many tax-form specific questions at this time of year...
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
nelsona
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Re: BC vacancy tax vs Canada resident, how to choose to save tax?

Post by nelsona »

Just one thing to be aware of: Once you are a non-resident, either by fact or by being deemed non-resident, you can no longer claim a principal residence in Canada for the period you are non-resident.
I am taking my usual break from this site until May. Always too many tax-form specific questions at this time of year...
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
ilysm
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Joined: Sat Feb 27, 2021 9:44 pm

Re: BC vacancy tax vs Canada resident, how to choose to save tax?

Post by ilysm »

Thank you very much for your valuable information, elgoog and nelsona!!!

elgoog, when you wrote "When you become a Canada non-resident, you no longer pay tax in Canada." Do you know, does this also applies to the BC vacancy tax? My wife will stay in our BC home in the next few years and I will stay in US. I read the first link (very helpful) you provided for a long time, and seems that for our case our vacancy tax can be exempted due to work reasons. However, I am not 100% sure (their examples are the spouses own 2 homes in BC places, not specifically say if it applies for non-BC, or even non-Canada places). If you are more certain on this, would you please confirm it for me?

Thank you so much for your recommendations! Previously we thought we have to either pay BC vacancy tax or income tax for my US income to Canada, but it seems that we might be able to save both for our particular case from learning the valuable experiences people provided here.
ilysm
Posts: 14
Joined: Sat Feb 27, 2021 9:44 pm

Re: BC vacancy tax vs Canada resident, how to choose to save tax?

Post by ilysm »

Thanks nelsona! I will definitely not claim a principal residence in Canada since I will live mostly in US due to work reason, and that is not a problem for me:) My own concern is, I am a co-owner of our BC home, if I still need to pay the BC vacancy tax as a non-resident. Thanks very much for any insight!
ilysm
Posts: 14
Joined: Sat Feb 27, 2021 9:44 pm

Re: BC vacancy tax vs Canada resident, how to choose to save tax?

Post by ilysm »

Seems that we are considered to be the satellite family, since my US income is much higher than my wife's Canada income. Must satellite family pay the BC vacancy tax or not?

https://www2.gov.bc.ca/gov/content/taxe ... ite-family

Untaxed worldwide earner (satellite family)
An untaxed worldwide earner, also known as a member of a satellite family, is an individual whose unreported (in Canada) income is greater than their reported (in Canada) total income. An individual’s income is combined with their spouse’s income for the purposes of this calculation.
nelsona
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Re: BC vacancy tax vs Canada resident, how to choose to save tax?

Post by nelsona »

This tax is not an income tax, so if you owe it you would need to pay it, just like real estate tax.

It would seem that since you meet the definition of a satelite family, you would need to pay the tax. I;m sure it would be less than the income tax.
I am taking my usual break from this site until May. Always too many tax-form specific questions at this time of year...
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
ilysm
Posts: 14
Joined: Sat Feb 27, 2021 9:44 pm

Re: BC vacancy tax vs Canada resident, how to choose to save tax?

Post by ilysm »

ah got it, thank you so much nelsona!
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