Vacant Home Tax (VHT) update for Toronto properties

Vacant Home Tax (VHT) update for Toronto properties

In 2023, Toronto homeowners faced two sets of reporting requirements related to properties that may not have been fully occupied as residences in 2022:

  1. Reporting under the federal Underused Housing Tax (UHT)
  2. The city of Toronto’s Vacant Home Tax (VHT) Declaration

The two reporting requirements have much in common, and it’s understandable if some taxpayers are unclear about the difference between the two. In both cases, reporting is based on the previous year’s occupancy status (i.e., the 2023 filing was based on 2022 occupancy status).

There may be substantial penalties for failing to file one or both of the reports. The UHT penalty for failure to report is a minimum of $5,000 for individuals and $10,000 for other property owners. A property owner who fails to file the declaration for VHT is deemed to own a vacant home and will be assessed the VHT at 1% of the assessed value of the property, which is subject to an appeal process to have the VHT reversed.

Over the last few months, the focus had been on the Underused Housing Tax (UHT) and its 2022 filing deadline, which has been extended a number of times, most recently to April 30, 2024. It may be easy to forget the VHT declaration is about to be due. The online portal for 2024 is already live and can be used to make declarations for 2023 vacancy status.

The overview that follows will only highlight the main changes made to the VHT since last filing season.

To make the annual declaration, the owner will need a 21‑digit assessment roll number and a customer number, which can be found on your property tax bill or property tax account statement. A property that is occupied for longer than six months in the previous year by the owner or a tenant will be exempt from tax. For the upcoming 2024 filing season, a tenant includes anyone who leased the property to operate a business for a term of greater than 30 days and tenants who occupy a property as a personal residence. There are also specific exemptions to the tax, including homeowners in long‑term care, properties undergoing repairs or renovations or a vacancy caused by the death of the owner.

The requirement to satisfy the exemption for a property undergoing repairs and renovations has been changed from “obtaining an opinion from the Chief Building Official and Executive Director, Toronto Building” to a requirement that repairs or renovations are being actively carried out without unnecessary delay.

Each residential property owner must file a VHT declaration. This is different from the UHT, which exempts certain individuals (such as Canadian residents and citizens) from filing the return.

While multiple owners of one property may all have UHT filing obligations, only one VHT declaration is required for each property. It should also be noted that no VHT declaration is required if:

  • the property is not yet assessed
  • the property is classed as multi‑residential, commercial or industrial
  • the property is classified by MPAC as vacant land, parking space or a condominium locker

A new exemption is provided for newly built housing inventory that is vacant, which applies for up to two consecutive taxation years.

Owners of properties subject to the tax will be issued a Vacant Home Tax Notice at the end of March, and payment will now be due in three instalments on May 15, June 17 and July 15, 2024, rather than the earlier deadlines, which fell at the beginning of those months.

For properties in 2022 and 2023, a VHT of 1% of the Current Value Assessment (CVA) will be levied on all Toronto residences that are declared, deemed or determined to be vacant for more than six months during the previous year. For example, if the CVA of your property is $1,000,000, the tax amount billed would be $10,000 (1% of $1,000,000). To date, the UHT rate remains 1%.

For vacancies in 2024 and future taxation years, a tax of 3% of the CVA will be levied on all Toronto residences that are declared, deemed or determined to be vacant for more than six months during the previous year. For example, if the CVA of your property is $1,000,000, the tax amount billed would be $30,000 (3% of $1,000,000).

The tax is based on the property’s occupancy status and CVA for the previous year. For example, if the home is vacant in 2023, the tax will be calculated using the 2023 CVA and will become payable in 2024. If a declaration is not submitted by the deadline, the property will be deemed vacant, and it will be subject to the Vacant Home Tax. As a result, it is costly to miss the filing deadline, which has been changed from the second business day of February to the last day of February.

Effective Jan. 1, 2024, a fee of $21.24 will be charged for failing to submit a declaration of occupancy status by the declaration deadline. This fee is intended to defray the costs of administering the declaration program.

The City of Toronto has collected approximately $54 million in VHT on 2,161 declared units and 17,437 deemed vacant units. However, the numbers are expected to be lower once all the appeals in progress are resolved. Even if the assessed VHT is ultimately reversed, the appeal process is stressful and costly, making it a wise idea to file the relatively simple declaration on time.

Putting tax in perspective

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