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What are the tax implications of building a laneway house?

Laneway home, Vancouver
Source: Smallworks

A laneway house is a small detached residential infill house that typically fronts on the lane of a larger principal house.

It’s important for property owners to understand their options before building a laneway house or buying a property with a laneway house. If your clients are looking for information about the tax implications of laneway houses, advise them about these scenarios outlined by the Canada Revenue Agency (CRA).

1. You own a principal residence and you hire a builder to build a new laneway house. You then rent or lease the laneway home to a non-relative.

The CRA considers you to be the builder, and to have:

  • sold, repurchased, or “self-supplied” the laneway house at its fair market value;
  • self-assessed and collected the GST on the sale; and
  • paid the GST on the repurchase of the laneway house

You must account for the GST on a GST/HST return (self-assessing), even if you are not a GST/HST registrant. You may:

2. You own a principal residence and you hire a builder to build a new laneway house for a relative, former spouse, or common-law partner to live in as their principal residence.

The CRA does not consider that you have sold and repurchased the laneway house and collected the GST if:

  • the laneway house is used primarily (more than 50 per cent) as a place of residence;
  • the laneway house is not used primarily for any other purpose after construction of the house is substantially completed; and
  • the individual (builder) did not claim any input tax credits (ITCs) when building the laneway house.

You can’t claim a non-registrant’s rebate for the GST paid on construction costs. You may:

3. You buy a property that includes a new principal residence and laneway house and you rent or lease the laneway home another individual as a place of residence.

The CRA does not consider you to be the builder of the laneway house or to have sold and repurchased the laneway house, or to have collected tax when you rent to a non-relative.

For more information, tell your clients to read the CRA’s The HST/HST Implications of the Construction of Secondary Housing Unites (Laneway Housing).

Did you know?

A laneway home increases the value of a client’s home. Building a laneway home:

  • could affect the client’s eligibility to claim the Home Owner Grant because of the increase in property value beyond the price thresholds; and
  • may also result in increased property taxes.

Laneway houses can affect a client’s principal residence exemption

How does a laneway house affect the capital gains principal residence exemption on a property owner’s income tax? The rules are complicated. Click here to read advice from tax advisor Grant Thornton.

As always, we advise members and their clients to seek a qualified legal opinion.

It’s important for property owners to understand their options before building a laneway house or buying a property with a laneway house.


Courtesy of the Real Estate Board of Greater Vancouver

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June 2, 2015

Metro Vancouver home sales surpass 4,000 for third consecutive month

It continues to be a competitive spring market for Metro Vancouver* home buyers. This competition continues to put upward pressure on home prices, particularly in the detached home market.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in Metro Vancouver reached 4,056 on the Multiple Listing Service® (MLS®) in May 2015. This represents a 23.4 per cent increase compared to the 3,286 sales recorded in May 2014, and a decrease of 2.9 per cent compared to the 4,179 sales in April 2015.

Last month’s sales were 16.7 per cent above the 10-year sales average for the month.

“We continue to see strong competition for homes that are priced right for today’s market,” Darcy McLeod, REBGV president said. “It’s important to remember that real estate is hyper local, particularly in a seller’s market. This means that conditions and prices vary depending on property type, neighbourhood, and other factors."

New listings for detached, attached and apartment properties in Metro Vancouver totalled 5,641 in May. This represents a 5 per cent decrease compared to the 5,936 new listings reported in May 2014.

The total number of properties currently listed for sale on the region’s MLS® is 12,336, a 23.2 per cent decline compared to May 2014 and a 0.8 per cent decline compared to April 2015.

“While the supply of homes for sale remains below what’s typical for this time of year, our region continues to offer a diverse selection of housing options at different price points,” McLeod said. “This diversity within the housing stock is part of what’s driving today’s home sale activity.”

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $684,400. This represents a 9.4 per cent increase compared to May 2014.

The sales-to-active-listings ratio in May was 32.9 per cent. This is the highest that this ratio has been in Metro Vancouver since June 2007.

Sales of detached properties in May 2015 reached 1,723, an increase of 18.6 per cent from the 1,453 detached sales recorded in May 2014, and a 42.2 per cent increase from the 1,212 units sold in May 2013. The benchmark price for a detached property in Metro Vancouver increased 14.1 per cent from May 2014 to $1,104,900.

Sales of apartment properties reached 1,600 in May 2015, an increase of 24.4 per cent compared to the 1,286 sales in May 2014, and an increase of 40.8 per cent compared to the 1,136 sales in May 2013. The benchmark price of an apartment property increased 4.6 per cent from May 2014 to $396,900.

Attached property sales in May 2015 totalled 733, an increase of 34 per cent compared to the 547 sales in May 2014, and a 37.3 per cent increase from the 534 attached properties sold in May 2013. The benchmark price of an attached unit increased 6.4 per cent between May 2014 and 2015 to $501,000.

*Note:  Areas covered by Real Estate Board of Greater Vancouver include: Whistler, Sunshine Coast, Squamish, West Vancouver, North Vancouver, Vancouver, Burnaby, New Westminster, Richmond, Port Moody, Port Coquitlam, Coquitlam, New Westminster, Pitt Meadows, Maple Ridge, and South Delta.

Download the complete stats package by clicking here. 

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