Kevin Greenard: Take advantage of the property tax deferment program

Kevin Greenard

The Property Tax Deferment Program in British Columbia was established in 1974, intending to assist seniors and the disabled. The program ensured that the property tax burden each year would not result in an individual having to sell their home to cover this obligation.

New this year, is that eligible homeowners are able to apply the 2020 property tax year using eTaxBC; a free and secure online service. For the first time this year, a homeowner may select auto-renewal to have their account automatically renew annually, so long as they still meet all eligibility requirement. With this new online service, they eliminated the need for paper forms. However, renewing a property tax deferment agreement may still be done by paper application. An electronic form is available on the website at: gov.bc.ca/propertytaxdeferment

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Property Tax Deferment is a low-interest loan program that assists qualifying homeowners in British Columbia with paying the annual property taxes on their homes.

The general Property Tax Deferment qualifications require that you:

• Be the registered owner(s) of the home and that it is your principal residence where you live and conduct your daily activities

• Be 55 years of age or older OR a surviving spouse OR a person with disabilities as defined in the Land Tax Deferment Regulations under the Land Tax Deferment Act

• Be a Canadian citizen or permanent resident under the Immigration and Refugee Protection Act (Canada)

• Have lived in British Columbia for at least one year immediately prior to applying

• Have paid all previous years’ property taxes, utility user fees, penalties and interest

• Have a minimum equity of 25 per cent in your home based on its assessed values as determined by B.C. Assessment

• Pay property taxes to a municipality or the Surveyor of Taxes

• Have a current fire insurance policy on your home. For the purposes of calculating equity, your property value is based on the assessed value of both land and improvements. However, if you don’t have fire insurance on your property, your property value is based on the land value only. Manufactured home owners who do not own land and do not hold a current fire insurance policy will not qualify for the tax deferment program.

Only one spouse must be 55 or older where the home is registered in both names. At the time of application, the owner must turn 55 during that calendar year to qualify. You can defer your taxes as long as you own and live in your home and continue to qualify for the program. The deferred taxes must be fully repaid, with interest before your home can be legally transferred to a new owner, other than directly to your surviving spouse or upon the death of the agreement holder(s). A one-time administration fee of $60 is applied to new approved deferment agreements. You can renew your agreement each year with a $10 fee. The set-up fee and the renewal fees are added to the deferral amount.

It is also important to note, the Property Tax Deferment Program also has a program for families with children, that has different qualifications and the interest rate is different.

For more information on both programs, and how to apply, visit the Ministry of Finance’s website at: gov.bc.ca/propertytaxdeferment

You can also get information by email at TaxDeferment@gov.bc.ca or call toll free 1-888-355-2700.

Interest Charges

If you choose to defer your property taxes, a key benefit to note is that the deferred amount is charged simple interest, this is better than compound interest that charges interest on interest. Another benefit is that the interest rate charged is not greater than 2 per cent below the rate at which the province borrows money. The interest rate is set every six months by the Minister of Finance. The interest rates are set every April 1 and Oct. 1. The current interest rate for the regular program is 1.95 per cent and is set for the period April 1, 2020, to Sept. 30, 2020. The rate may change every 6 months and will be reset again on Oct.1, 2020.

Means Test

One of the most interesting components to this program is that there is no mention of a means test. Individuals of all income levels may apply, provided they meet the general qualifications. Although the program may have been designed for those struggling to pay expenses, others may also take advantage of the terms of deferment. With the interest charges as low as they are, individuals may choose to defer their property taxes for a variety of reasons. From an investment standpoint, this makes sense if an investor feels they could generate an after-tax return greater than the interest charges.

2019 Numbers for Vancouver Island

Jurisdiction

Number of Households

      Amount Deferred ($)

Saanich

3,171

13,297,718

Victoria

2,043

7,811,445

Oak Bay

1,124

6,900,193

Nanaimo

1,743

5,346,995

North Cowichan

906

3,252,486

Gulf Islands Rural

839

2,755,842

Duncan Rural

863

2,697,377

Central Saanich

665

2,569,878

Alberni Rural

884

2,531,794

North Saanich

578

2,083,988

Courtenay Rural

719

2,022,353

Campbell River

699

1,978,987

Esquimalt

509

1,974,978

Qualicum Beach

616

1,949,480

Courtenay 

692

1,842,514

Sidney

554

1,782,246

Parksville

491

1,291,917

Colwood

333

1,017,453

Comox

408

982,421

Langford

348

858,893

Ladysmith

260

823,031

Nanaimo Rural

294

718,653

Sooke

238

671,694

Port Alberni

282

595,980

View Royal

211

577,352

Lantzville

107

361,848

Source: Property Taxation Branch, Ministry of Finance

Strategies to Consider

• Strategy 1: The most basic strategy is to use the funds that you would normally use to pay property taxes to fund day-to-day expenses. This strategy is essentially the main reason the program was put into place.

• Strategy 2: Another strategy for the use of the funds is to put these funds into a Tax Free Savings Account (TFSA) if you have not already maximized the account. Ensuring your TFSA is always topped up may give you another nest egg to prevent you from running into financial problems in the future.

• Strategy 3: For individuals who are 55 plus and still earning significant income, redirecting the cash to top up your Registered Retirement Savings Plan (RRSP) contribution may be a prudent move.

• Strategy 4: Another option instead of the TFSA and RRSP strategies is to either add to your non-registered investment account (or open a non-registered investment account if you do not yet have one) and begin building up a portfolio that will generate income for you (i.e. basket of dividend paying equities) greater than the simple interest of 1.95 per cent.

• Strategy 5: If your ultimate objective is to enhance your overall estate value then proceeds could be used to fund a life insurance policy.

Prior to implementing any of the above strategies, you should contact your accountant and portfolio manager to see what course of action is appropriate for you.

Kevin Greenard CPA CA FMA CFP CIM is a portfolio manager and director, wealth management, with The Greenard Group at Scotia Wealth Management in Victoria. His column appears every week at timescolonist.com. Call 250-389-2138. greenardgroup.com

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