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        <title>Real Estate Blog</title>
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    <guid>https://www.airdrierealestate.ca/blog/how-vacation-homes-are-taxed-at-the-time-of-sale.html</guid>
    <link>https://www.airdrierealestate.ca/blog/how-vacation-homes-are-taxed-at-the-time-of-sale.html</link>
        <author>justin@justinhavre.com (Justin Havre Real Estate Team)</author>
        <title>How Vacation Homes Are Taxed at the Time of Sale</title>
    <description> <![CDATA[ 





Selling a vacation home is going to take a little more energy than selling a primary residence because the two are taxed so differently. The process becomes even more complicated if sellers generated rental income during their time of ownership. What are the tax implications of selling a second home? To understand the full implications of a sale, sellers should know the basics of capital gains, capital losses, and depreciation before putting the home up on the market.


For informational purposes only. Always consult with a certified tax expert before proceeding with any real estate transaction.


Capital Gains Tax: How It Works


How does capital gains tax work? A capital gain refers to the total cost of appreciation from the time the asset was purchased to the time it was sold, with the end result taxed based on the owner's income. So, if the home was purchased at $300,000 and sold for $500,000 (after deductions), the owner would have a capital gain of $200,000. In Canada, people selling their primary homes have generous leeway when it comes to deducting most (if not all) of their capital gains. However, a person selling a vacation home will not be given the same considerations. Selling your second home without capital gains taxes is next to impossible.


Capital Gains Tax: How It's Calculated


How are capital gains taxed? Capital gains are taxed at half the total value on a progressive income scale. In the case of the above example, it would be $100,000. Those in the top income brackets would end up paying a full 43 of the assessed capital gains, or $43,000 in capital gains tax. The most common way to reduce capital gains tax is to keep track of the seller's improvements to the home. So if a seller completed a $15,000 kitchen remodel, they can add that cost to the original sale price of the home, thereby lowering the total capital gains. (The taxation of capital gains began in 1972, so only gains accrued after that year will count.)


Primary Residences


Because primary residences aren't subjected to capital gains, sellers can potentially use this rule to their advantage during the year they sell their home. If the vacation home has accrued more in capital gains than their primary residence, then they can move into their vacation home during the year of sale as a loophole to paying the full cost of capital gains. They do not necessarily need to stay in their residence for the full time, but they will need to prove they lived there at some point. Coopers Crossing homes that are being rented out during the year will have separate rules. This particular option can be complicated in terms of paperwork and requirements, but it could be a good way to legally avoid a major financial hit.


Additional Options


Canadians can deduct capital losses from their capital gains, meaning it may make more sense to sell off the primary residence along with the vacation home if the primary residence has plummeted in value. Owners can also donate their gains to a registered charity during the sale calendar year so they can receive a tax credit. This credit can potentially reduce the amount of total taxes owed for capital gains on the sale of second homes. The Canadian Revenue Agency will also sometimes grant extensions to the taxation if sellers expect a long escrow period after selling off their second home.


Selling a vacation home can still be a profitable decision if sellers understand how to calculate capital gains tax. Because the rental and primary residence rules can be tricky though, it helps to consult with a real estate agent or financial planner to make the process go run more smoothly.


For informational purposes only. Always consult with a certified tax expert before proceeding with any real estate transaction.


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    <pubDate>Fri, 18 May 2018 08:44:00 -0600</pubDate>
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    <guid>https://www.airdrierealestate.ca/blog/understand-more-about-home-buying-contingencies.html</guid>
    <link>https://www.airdrierealestate.ca/blog/understand-more-about-home-buying-contingencies.html</link>
        <author>justin@justinhavre.com (Justin Havre Real Estate Team)</author>
        <title>Understand More About Home-Buying Contingencies</title>
    <description> <![CDATA[ 





Both buyers and sellers need to know about home-buying contingencies in a contract. These clauses can offer some advantages but may also create certain obligations that need to be met within stated timeframes. This may serve to move the purchase of a property along or provide a legal means for a party to get out of the contract. What should buyers and sellers know about home-buying contingencies?


Learn more about common Canadian home-buying contingencies before signing a contract today.


Where to Find Those Home Sale Contingency Clauses?


These clauses may be located within the real estate sales contract or contained within an offer to purchase property. For the transaction to be considered as binding, the contingency clauses must be met. If this does not occur, any party may decide to back out without consequences. In a seller's market, some buyers may choose to forego such clauses. This may make them more attractive to a seller. However, they may assume more risk when purchasing a property without including home-buying contingencies.


What Are Some Canadian Home Contingencies?


Home-buying contingencies have become expected in purchasing contracts. Contingencies often include:




A Sale and Settlement Contingency


The Settlement Contingency




In a sale and settlement contingency, a buyer is looking to sell their current home before purchasing a new home. They are given time to do so. However, at the same time the seller continues to show the home and may attract additional offers. If a seller gets an offer, the seller has up to 48 hours in many cases to respond and remove the clause. If this does not occur or is not feasible, the seller is allowed to accept another offer.


This provides a way for the buyer to show serious interest in a home with the intent to buy while allowing them to get the equity and finances needed from their original home. Sellers still have means to show and market a home during the process and not lose out on the possibility of additional offers. If the contract is terminated, any earnest money deposit is returned.


A settlement contingency occurs later in the process. It happens before closing and gives some measure of protection to a buyer. No other offers are to be accepted and with this clause the buyer is expected to close on a home by a stated date.


What Are A Few Disadvantages of Home-buying Contingencies?


It can take time, money and effort to sell a home. When home contingency clauses are not met, a homeowner may have to start showing a home once again. This can be a hassle and a disappointment for the seller that believed a buyer was interested in going to closing on their home. Buyers often receive earnest money deposits back. However, they may be out appraisal fees, home inspections fees and more if either party does not attend to meeting stipulations by the deadlines stated on the contract.


Learn More About Home-buying Contingencies


There is much to understand about these clauses and those buying or selling a King's Heights home may want to know what to expect about common home-buying contingencies in their area. Sellers may agree to contingencies if their home has been on the market for over 90 days without an offer and may have to contend with the uncertainty that comes with settlement clauses. A seller may want to discuss home contingency clauses with a reputable agent prior to marketing a home in Canada.


 ]]> </description>
    <pubDate>Fri, 04 May 2018 09:23:00 -0600</pubDate>
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