Thinking of House Flipping? There are new tax rules in 2023.

The New Anti-Flipping Rule.

Most of us are aware that when selling our principal residence, we can claim the principal residence exemption reducing or eliminating the capital gain or fully taxable business income tax all together.

New rules went into play earlier this year in respect to the sale of residential real estate (including rental property) within a year. If you are looking to buy a residential property and sell it within 12 months you will be taxed at 100 per cent business income and are ineligible for either the 50 per cent capital gains rate or the principal residence exemption. This property would be considered a “flipped property” as it has been owned for less than 365 consecutive days. There is talk that this could also apply to gains arising from assignment sales, individuals who hold the rights to a pre-construction residential property and sell those rights for a gain within 12 months. However, at the time of writing this article, this has not been passed by legislation.

There are some exemptions should any of the following of these life events take place:

-          Household addition, such as birth, adoption, or care of an elderly parent.

-          Death of individual or related party in the household.

-          Breakdown of marriage or common-law partnership.

-          Threat to personal safety.

-          Work relocations or termination.

-          Insolvency.

-          Involuntary disposition, such as from a natural or human-caused disaster.

The new rule is rather complex, and I suggest you reach out to a tax accountant to determine whether this may affect you.

Disclaimer

The information contained in this article is general in nature and is based on proposals that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice or an opinion provided by Michele MacKenzie to the reader. This material may not be applicable to, or suitable for, specific circumstances or needs and may require consideration of other factors not described herein.