The new Canadian Anti-Flipping Tax is a government initiative to encourage long-term homeownership and make housing more affordable while taxing flippers looking to buy properties purely for profit.

The tax may seem like a way to target flippers – and it is! – but what the ultimate goal of it is to combat excessive price growth in housing, helping to regulate affordability in addition to measures taken against foreign buying and false use of the principal residence exemption.

This came into effect on January 1, 2023.

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How Does The Canadian Anti-Flipping Tax Work?

How the anti-flipping tax works is if you buy a property and sell it within 365 days of ownership, any profits derived from the sale are taxed as business income. That is a massive jump in taxes compared to how a real estate sale is normally taxed which is as capital gains. The rule of capital gains is only 50% of the profit from the sale of a property is taxable.

So, in essence, the Canadian Anti-Flipping Tax ensures taxes are paid on the whole of the profit.

What The Anti-Flipping Tax Means For Buyers

For buyers who are not buying real estate to flip, as you don’t sell within 1 year of purchase, this tax should not have any impact on you.

If you are a flipper, what this means is that you will be required to hold on to your real estate for a little longer than you may prefer. This will require budgeting for property taxes and any other expenses that you may incur over the year to follow.

To some degree, however, this could mean looking at means of deriving income from the asset. If you sell, you will be hit with a massive tax bill so don’t even bother to try to find a work-around. Instead, consider interim alternatives, such as making it a rental unit for a few months. Move in family. It’s up to you. There are definitely a few options on how you can maximize profit on real estate which is still a very valuable asset, even with this tax installed.

Looking for more home-buying resources? Read these posts next:

What The Anti-Flipping Tax Means For Sellers

For sellers, regarding the anti-flipping tax, they just need to make sure they’re selling their home within the right time frame.

If you are someone house-flipping or rehabilitating properties for resale, and already paying capital gains or business taxes, there is no real impact to you so long as it’s done outside the parameter of the 1-year mark.

For more selling resources, tips, and tricks, check out the selling page on our blog right here.

Is There A Way To Get Around The Anti-Flipping Tax?

Anyone in real estate obviously wants to minimize how much tax they pay on property because it can take away so much from their profit. Total profit, of course, is also calculated based on expenses and any costs that went in to performing updates, renovations, and anything else to market real estate.

Can you get around the anti-flipping tax? Not really. In the past, some have used illegal means to avoid taxes, such as misusing the principal residence exemption and taking other means to essentially avoid paying the taxes that they are legally required to pay. If you use a home as a primary residence, it is not subject to taxation. The anti-flipping tax, however, also applies to primary residences.

There are exceptions to the anti-flipping tax that you may be able to utilize in your situation if they apply.

  • Death
  • Divorce
  • Safety issues with the property
  • Illness or disability requiring a sale or a sale motivated by an illness or disability
  • Relocation due to education or employment
  • Insolvency

These reasons are the only way one can legally and successfully minimize the impact of the

Real estate laws and regulations in Canada are always changing. For more info on how to invest in real estate in the South Etobicoke region, and to see properties to buy and sell, talk to your experts at Adrian + Andrea.

You can call us directly at (416) 319-6893 or email info@adrianandrea.com to get in touch!