A vacation home has been a lifelong goal of yours, and you’re finally in the financial position to invest in that beach house, ski chalet, or international getaway you’ve been dreaming of. But hold on – you’ve thought about the costs that occur after you purchase the property too, right? Before you jump into buying a second home in Ontario be sure to factor in ongoing expenses such as maintenance, travel to and from the destination and property taxes. Here are five tips to help you navigate the tax-related expenses of purchasing a second home in Ontario.
Tax rates vary based on where you buy
It’s a given that certain provinces charge a higher tax rate than others, so before you purchase a vacation spot, investigate how much you’ll have to pay annually in property taxes.
Don’t forget about future tax increases
A smart real estate investment means the property’s value will rise, meaning a bigger payoff when you decide to sell. But in the meantime, don’t forget about the cost that comes with a higher-value property.
If you buy in a hot market or an area seeing a lot of development, don’t be surprised if property values increase significantly as more people purchase and demand grows. Once your property is appraised for a higher value, the amount you’re expected to pay in taxes will increase accordingly. It’s also possible the property tax rate will increase in the future in parallel with the cost of living.
Consider the amount of time you will spend there
If you plan to spend at least half the year in your second home in Ontario, it may be financially beneficial to change your primary residence. If you have a home abroad, and you’re purchasing a second home in Ontario and plan to spend most of your time there, becoming a citizen in your new country may be a feasible option.
Be sure you don’t overlook additional costs before you purchase your second home. And wherever you live, you should be concerned about how your home will be cared for while you’re not there. Ca you shutter the home well enough to avoid weather-related property damage? You may need to pay an individual or management company to ensure your property stays in good shape while you’re away, or hire someone to handle rentals if you wish to turn your vacation nhome into an income property. For rental units, it’s common for property managers to charge around 10 percent of the residence’s monthly rental value, but costs can vary based on where you’re located, whether you hire a company or individual to care for the home, if the property is vacant while you’re away, and what work may be required.
Owning a second property in the Ontario region can have many advantages. But as comes with the acquisitions of many high ticketed goods thought and foresight should be given and all impulsivity should be avoided!
We recommend having a detailed conversation with a professional in the field before taking the leap to identify what your future personal goals and objectives may be. Here at Al-Mulla CPAs Professional Corporation we say “Tax requires planning, not just compliance!” We will sure do our very best to match your short or long term goals and we will certainly make every possible effort to save you on every possible tax dollar! Contact us today for your free no obligation tax advice.
