When you buy and sell property in New Brunswick, the province levies a land transfer tax fee on the transaction. Find out how that fee works, as well as how much rent you should charge your tenants to avoid paying it!
New Brunswick’s land taxes are divided into two categories: municipal, which is charged by municipalities to all residences; and provincial, which is only assessed on properties bought or sold in New Brunswick. A portion of the provincial rate goes towards municipal services.
The rates of both types of taxes vary depending on what kind of property you’re buying or selling.
When you buy a property in New Brunswick, you pay a percentage tax to the province on the “advance value” of the property. This is based on your purchase price, so it definitely changes depending on how much your property is worth. That’s why it’s important to know about these different rates for each kind of property:
and two types of properties:
You can save some money by avoiding paying land transfer taxes if you are a renter. The province imposes land transfer taxes very strictly in this case. If there are two or more tenants renting out your home, then they must have a written agreement between them to make sure that the right amount of tax has been paid when they sell the home together. Land transfer taxes will be based on the combined values of all the tenants, so that a tenant who has contributed less than others is not not penalized. If a tenant has been renting for ten years or more, then you can apply to have land transfer tax fees refunded.
When you sell your property in New Brunswick, the land transfer taxes are based on the “final value” of the property. This is calculated by taking the “advance value”, calculating an additional 2% tax and then multiplying it by 0.12 (or 1/8). The result will be your final value tax rate. Or, if you are a tenant and selling your home, then it will be calculated by taking the “advance value” of your home, calculating an additional 2% tax and then multiplying it by 0.12 (or 1/8). The result will be your final value tax rate.
Land transfer tax for a home with two or more tenants can vary widely depending on which of the two types of properties you’re buying.
For example: If you’re buying a house with three tenants, then the cost to purchase that property is 343% more than if you were only buying it from just one tenant – and the taxes for each tenant are 344% higher – even though their final values are exactly the same. This is due to the fact that the tax is imposed on the “advance value” of the property, which can be as much as 35% higher for a house with multiple tenants than for a house with only one tenant.
This difference can make it more difficult for landlords and tenants to decide how much rent they want to charge each other. That’s why we’ve created some numbers that you can use when discussing rent:
The percentages above are conservative estimates, but they help illustrate the impact that tenants have on your taxes when you buy a home or sell it. For example, if you were to sell your home with just one tenant, you’d pay a total of $2,972 in land transfer tax (this assumes that each tenant has $3,000 worth of property and that the final value is 15% higher than the advance value – at 11). However, if you were to rent out your apartment with three tenants who all contributed $3,000 towards the purchase price – or combined value – then the total value of all their dwellings would be 389% greater than what they paid for. Therefore, you’d have to pay $8,553.60 in land transfer taxes (this assumes that their combined value is at 197%, their total value is 389% greater than their combined value and the final value is 15% higher than the advance value).
Another example: If you were to sell your home with just one tenant, then you’d only pay $2,972. However, if you were to rent out your apartment with three tenants who all contributed $3,000 towards the purchase price – or combined value – then the total value of all their dwellings would be 389% greater than what they paid for. Therefore, you’d have to pay $8,553.
Conclusion
When you’re buying or selling property in New Brunswick, the land transfer tax-rate can swing widely depending on whether there are two or more tenants renting your home. It can also be worth calculating a total value rather than an advance value, as this gives you a clearer idea of how much tax you’ll have to pay.
Nobody likes paying taxes, but they are unavoidable! In any case, it is important that people know their rights to avoid overpaying and being penalized.
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