The year 2025 brings some important updates to Canada’s real estate tax laws. These changes are set to have a big impact on real estate agents, investors, and first-time buyers.
Understanding these new rules is key for agents who want to stay ahead and provide the best advice to their clients.
If you’re working in the Canadian real estate market, you need to be aware of the Canadian real estate tax changes in 2025. These tax changes affect everything from commissions to property investments.
Some of the most notable changes involve capital gains tax, property transfer taxes, and updates to foreign buyer taxes. Let’s understand the latest updates and what they mean for your clients and business.
Key Changes in Canadian Real Estate Tax
1. Capital Gains Inclusion Rate Increase
One of the biggest changes is the rise in the capital gains tax in Canada in 2025. In simple terms, the government will now take a larger share of the profit made when selling a property if the sale price exceeds $1 million.
- What’s Changing?
Previously, the government taxed only 50% of the profit (capital gain) you made on the sale of a property. However, starting in 2025, the tax rate will increase to 65% for any property sold for over $1 million, excluding primary residences.
- Why It Matters to Agents:
If your clients have properties worth over $1 million, this tax change could seriously affect how much profit they make. If your clients want to sell their investment properties, it’s a good idea to do it before April 2025 to avoid the higher capital gains tax.
- Agent Tip:
Encourage your clients to consult a tax professional about how this change could impact their financial plans. It’s also a good idea to check the capital gains tax in Canada for 2025 and explain the possible impacts to your clients.
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2. Foreign Buyer Ban Updates
In 2025, there are changes to the foreign buyer tax. It includes new exemptions that are now available. While foreign buyers are still facing restrictions on purchasing residential property, certain groups are exempt.
- Who’s Exempt?
Foreign workers in fields like STEM (Science, Technology, Engineering, and Math) and refugees now can purchase homes in Canada, even if they are not permanent residents or citizens.
- What This Means for Agents:
If you’re working with international clients, be sure to explain the updated exemptions to them. The rules may seem complicated, but this change could benefit both buyers and sellers in the Canadian market, especially in areas like Vancouver or Toronto where foreign investment has been high.
- Agent Tip:
Keep up to date on this policy, as the landscape for foreign buyers can shift quickly. Educate yourself on the latest exemptions and consider creating a guide for foreign buyers to help them navigate the process.
3. Vacancy Taxes Expanded
In Canada, vacancy taxes are becoming a bigger issue. The government is expanding the vacancy tax to more cities beyond just Vancouver and Toronto. In 2025, cities like Ottawa, Hamilton, and others will now be included in the tax.
- What’s Changing?
If a property is left vacant for a certain period, the owner will face a tax. This is designed to discourage speculation and help ease the housing shortage.
- What This Means for Agents:
As an agent, you need to be aware of which cities are now affected by this vacancy tax. If you’re working with sellers, make sure they understand how long they can leave their property vacant before being taxed. If you’re helping buyers, be sure to research local regulations in the cities they’re interested in.
- Agent Tip:
Encourage your clients to occupy their homes or rent them out if possible to avoid this tax. If clients plan to leave properties vacant, it’s important to discuss the financial implications of the vacancy tax.
4. Principal Residence Exemption Changes
The principal residence exemption allows homeowners to sell their primary home without paying taxes on any capital gains. However, changes to this exemption in 2025 mean more paperwork and potential complications for some homeowners.
- What’s Changing?
Starting in 2025, if a homeowner sells their primary residence and claims the exemption, they will need to provide more detailed information about the property. This includes the dates they lived in the home and proof that it was indeed their principal residence.
- What This Means for Agents:
Be ready to explain the new documentation requirements to your clients. They need to provide all necessary information when selling their home to avoid delays or potential penalties.
- Agent Tip:
Help your clients gather the required documents early in the selling process. Providing a checklist for principal residence exemptions could save time and headaches down the road.
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What are the Effective Strategies for Agents?
Now that you know about the changes in Canadian real estate taxes in 2025. Here are a few strategies to help you guide your clients through these updates:
1. Advise Sellers to Act Quickly
With the upcoming changes in capital gains tax and the expanded vacancy tax, it’s in the best interest of many sellers to move quickly. Encourage clients to list their properties sooner rather than later to avoid paying higher taxes.
2. Keep Clients Informed About Foreign Buyer Policies
If you’re working with international buyers or sellers, make sure you’re clear on the latest updates regarding the foreign buyer ban and the new exemptions. This is an essential aspect of real estate transactions, especially in big cities.
3. Provide Updated Guides
Stay ahead by offering your clients updated, easy-to-understand resources on the new tax changes. This might include guides on how the vacancy tax works or step-by-step instructions for claiming the principal residence exemption.
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Conclusion
The Canadian real estate tax changes in 2025 will have a big impact on the real estate market. Whether it’s the capital gains tax Canada 2025, new foreign buyer exemptions, or changes to vacancy taxes, it’s essential for agents to stay on top of these updates.
Remember, knowledge is power, so be proactive in informing your clients and adjusting your strategies to stay ahead of the curve.
For more tips and resources, don’t forget to download the guide on how to explain tax changes to sellers.
