Real Estate: Are residential properties and commercial properties taxed differently?

When considering an investment in real estate, you may be debating between residential and commercial properties. There are benefits to investing in either category, so investing may come down to other factors such as taxes. In Canada, there are two types of property tax; land transfer tax and individual property taxes. It is important to get to know each type to find out how much you may owe for properties you are interested in investing in.

Property Taxes in General

In general, property taxes are based on where the property is located. The rate is set by the local government and what percentage you will pay for residential and commercial property is based on the city or municipality in which the property is located, plus the assessed value of the property. When you use the property for rental income, the property tax amount paid can be deducted from income when you are paying your yearly taxes.

Take for example residential property in Calgary and Ottawa. In Calgary, a detached bungalow has a property tax rate of .84% and a standard condo apartment has a tax rate of .88%. In Ottawa, the price is much higher at 1.34% for detached bungalows and 1.08% for the standard condo apartment. It is important to learn the rate for the given area where you are searching for property and consider the overall cost of the purchase to indicate if you can afford the tax price.

Land Transfer Tax

The land transfer tax is a provincial tax that is levied at the time of purchasing land or a home in Canada. Each province has a land transfer tax except for Saskatchewan and Alberta. In most cases, the tax is calculated as a percentage of the purchase price.

In certain provinces, you will be able to receive a land transfer tax rebate when you are a first time home buyer. These areas include Prince Edward Island, Ontario and British Columbia. A mortgage company will be able to assist you with determining the tax rate for a property you are interested in.

Paying Your Taxes

The way you pay your taxes will be dependent on a number of factors including where you live, what type of property you have, etc. When you have a residential property management team in place, they will take care of the payments for you via your accounts. The same can be said for a commercial property management company. It is important that taxes are paid on time and in full.

Overall, the amount you pay for your taxes will be dependent on several factors. It is important to work with a quality lender who can help you configure the price of taxes as well as the monthly mortgage payment so that you can determine if the property you are interested in is worth the investment.

At Latitude Properties, we want to help you manage your real estate, with a variety of services at your disposal. We can assist with taxes as well as maintenance and repairs of the property, additional accounting and more.