What the “School Tax” Means for British Columbians
Posted by Ocean Wealth
Last year, the Government of British Columbia implemented its additional school tax on high-value properties. Met with a fair share of controversy, its main purpose is to share in the cost of providing education in B.C.
As it stands, it’s a percentage-based tax on B.C. homeowners with the most high-valued residential properties in the province. It impacts detached homes, stratified condominium or townhouse units, and most vacant land. It’s important to note, however, that this tax doesn’t apply to non-stratified rental buildings with four or more housing units.
The additional school tax rate is 0.2% on residential properties assessed between $3 million and $4 million. Residential properties assessed at over $4 million, however, have a heightened tax rate of 0.4%. Like any newly implemented tax, people want to understand the why behind it. We’re going to help break down the school tax and what it means for British Columbians moving forward.
Who Does It Impact?
The most important thing to understand about the school tax is who it impacts. We mentioned in the introduction that it specifically targets high-valued properties in the province. That said, let’s put things in layman’s terms.
There are many people who think the school tax is justified as they believe it only targets wealthy individuals who own homes worth $3 million or more. But take one of the most expensive neighbourhoods of Vancouver like Point Grey as an example. A 2016 census report showed the median income in Point Grey was $84,951, with seniors expected to be lower.
As you can see, this doesn’t necessarily follow the narrative that only Vancouver’s elite earners live in Point Grey. Despite this, these individuals and families are still taxed in the same way based on the value of their homes. Someone who’s lived in the neighbourhood for over 50 years and isn’t a multimillionaire can still be subject to the school tax regardless.
The school tax is not proportionate to one’s ability to pay. These numbers show that there’s a clear discrepancy between the average person’s income and how much they’re expected to pay in taxes.
The Unpredictability Factor
There are a number of homeowners in B.C. that are likely on the cusp of the school tax based on their homes being assessed at almost $3 million or more. While real estate prices in Vancouver have cooled slightly, what about the rest of the province?
It’s difficult to say whether residential property assessments will continue to rise in other regions of the province. If that happens to be the case over the next 5-10 years, there’ll be many more people affected by the school tax. This could even apply to people who have left Vancouver in search of more affordable housing in other provincial regions.
On the flipside, most of the affected homes have already increased in value by almost 400% since 2007. For homeowners, that translates into a tax-free capital gain when the home is sold. This means many of the homeowners will still end up making a significant profit from the sale of their home that may or may not outweigh the school tax.
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