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Property Tax Deferrals
April 6, 2021
12:13 pm
Alexandra
British Columbia
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Property Tax Deferrals

Does anybody here do this? If you are senior in BC, they only charge .45% simple interest on property tax deferral. Does it make sense to do this i.e. not pay your property tax and use the funds say to buy a 2.25% 10 yr GIC paid annually?

April 6, 2021
12:51 pm
topgun
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You have to pay some income tax on 2.25%. .45% is not deductible. You will make something on the differential. Is it really worth it? I would not do it.

Have a Great Day

April 6, 2021
1:41 pm
Alexandra
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It would drive me crazy owing money like that. I have never done it. But I noticed that if one owner is 55 and say their spouse is 50, they would qualify for the "senior" deferral rate. When you think of it, a person who is 50 years old and lived in the same house all along, they could be there 40 years without paying any property tax. Insane really.

April 6, 2021
2:31 pm
pooreva
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Deferral for how long???
Eventually you will have to pay the whole amount. Plus interest...

April 6, 2021
2:51 pm
Doug
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pooreva said
Deferral for how long???
Eventually you will have to pay the whole amount. Plus interest...  

Some seniors are land rich and cash poor. Also, the interest rate is quite low. I believe the property tax can be deferred until the property is sold, or until the property owner(s)' death(s), whichever comes first.

Bear in mind that the provincial government does need to register a charge against your property if deferring property taxes, so if one has a mortgage on their property, they need to have sufficient "room" relative to the assessed value of the property and the existing mortgage in order to defer their property taxes.

In short, if you have sufficient cash flow, I'd just pay one's property taxes annually; however, where one does not, in most cases, it is more economical to defer one's property taxes than take out a line of credit, loan, or mortgage from a financial institution.

Also, in the Lower Mainland and Victoria in particular, property taxes are quite high, so there may be many cases where seniors can't afford all or part of their property taxes as their properties have seen astronomical increases in assessed values compared to what they paid. sf-cool

Cheers,
Doug

April 6, 2021
2:55 pm
Doug
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Alexandra said
It would drive me crazy owing money like that. I have never done it. But I noticed that if one owner is 55 and say their spouse is 50, they would qualify for the "senior" deferral rate. When you think of it, a person who is 50 years old and lived in the same house all along, they could be there 40 years without paying any property tax. Insane really.  

Not really. If their property they paid $100,000 is now worth $1,000,000 or more, remember you're only paying interest on the amount deferred each year, so only in the final years are you paying interest on, say, $150,000 in deferred property taxes. The provincial government still provides the payment to the local taxation authorities; it is then repaid, with interest, when the property is sold.

Cheers,
Doug

April 6, 2021
3:11 pm
Loonie
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City of Toronto has or did have some provision for this kind of thing but I've never looked into the details.

I would think it could add to your legal expenses when you sell or die as the lien would have to be de-registered, assuming there is one, which seems likely.

April 6, 2021
4:28 pm
AltaRed
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Doug said
Also, in the Lower Mainland and Victoria in particular, property taxes are quite high, so there may be many cases where seniors can't afford all or part of their property taxes as their properties have seen astronomical increases in assessed values compared to what they paid. sf-cool

Cheers,
Doug  

That is only an issue if THEIR homes have had MVAs increases disproportionately higher than the municipal average. Otherwise MVAs take care of that via a reduced mill rate overall. People make terrible assumptions about how increased MVAs increase their taxes. They don't with all other things being equal.

April 7, 2021
12:43 pm
Rick
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I have done this with my last house. The provincial government actually pays your property taxes (except the garbage portion ???) to the municipality every year on your behalf. There is an initial fee and a smaller renewal type fee every year. Not onerous, but does affect costs. The interest is added to your account every year. It is simple interest, not compounded, and the rate is below bank rates. When I was getting 3% interest, I actually made money by putting my property tax in a HISA and letting it sit. Not sure if you could do that these days. When I sold, the entire amount comes due and is all handled through the lawyers doing the transfer. Ideally, you would stay in your home, deferring property taxes, until you kick the bucket and let your heirs deal with it out of your estate.
If you are living on a shoestring, I think it's a great help. If you aren't, don't think it's worth the time & trouble. Though I hear it is taken advantage of frequently by the wealthy to defer the taxes on their mansions.
Not utilizing it with my current home.

April 7, 2021
1:11 pm
Alexandra
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Right now the fee for seniors (over 55 for one owner); is $65 for the first year and $10 per year after that. The simple interest rate is at .45% per year.

You have to have the right mindset for it alright. I couldn't do it. But maybe I would have if I had looked into it when I was 55 yrs old. Probably not. It might be a nice way of keeping 3-4-5 thousand a year for yourselves if you had no close heirs to leave your estate to.sf-smile

It was just another subject to bring up while we are sitting here in the doldrums!!

April 7, 2021
4:47 pm
Loonie
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By way of comparison, everyone who has an RSP or RIF owes taxes on that as well, often six figures, which could affect the heirs, but most people don't seem concerned about it.
It's all in how you look at it.

April 7, 2021
7:50 pm
christinad
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Thanks for the details. Its good to know about in case of job loss or health problems later in life. I can see this being useful to have until cpp kicked in if i ran into problems. I don’t have kids but i could see myself feeling guilty if i deferred until i died. That may add up a lot. Who knows how i’ll feel though at the time. It is my money.

April 9, 2021
11:37 am
Londonguy
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christinad said
Thanks for the details. Its good to know about in case of job loss or health problems later in life. I can see this being useful to have until cpp kicked in if i ran into problems. I don’t have kids but i could see myself feeling guilty if i deferred until i died. That may add up a lot. Who knows how i’ll feel though at the time. It is my money.  

It would certainly conjure up what I will label a "Funeral Surprise" for the heirs if they've all been expecting a big payout when they sell off Mom & Pop's house, only to find out that Mom & Pop owe 30 years of back property taxes against it on top of the RIF taxes.

Wouldn't you like to be a fly on the wall of that family meeting. Mom & Pop might even earn some new nicknames, none of which I can post here

April 9, 2021
12:15 pm
Bill
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Kinda getting interested in this, I'm always looking for more ways to be remembered by my loved ones after I'm gone.

Londonguy, I live in London too, is this thing available here?

April 9, 2021
1:44 pm
christinad
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It would seem a good idea to warn my heirs then if i decide to do it! I’m single and would leave my money to my sisters and nieces.

April 9, 2021
3:18 pm
Londonguy
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Bill said
Kinda getting interested in this, I'm always looking for more ways to be remembered by my loved ones after I'm gone.

Londonguy, I live in London too, is this thing available here?  

Apparently you might be entitled for relief in Ontario if you don't live in a city and your income is low enough that you receive GIS -- https://www.fin.gov.on.ca/en/refund/plt/seniors.html

But since anybody with RIF payments probably isn't collecting GIS, my double unpaid tax whammy can't really happen, not in Ontario at least.

I too find the subject interesting and had never actually heard of this stuff before the topic came up. I found a link with a provincial summary of these programs, although the website might be out of date (the BC rules seem to be different from what's already been posted upthread, and I assume those posters are more currently informed) -- https://www.federalretirees.ca/en/my-money/financial-information-tools/property-tax-deferral

April 9, 2021
3:31 pm
Loonie
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christinad said
It would seem a good idea to warn my heirs then if i decide to do it! I’m single and would leave my money to my sisters and nieces.  

In particular, make sure your executor knows!

April 9, 2021
4:17 pm
Loonie
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Just wondering.... is there anything to prevent someone from having a reverse mortgage or HELOC or even a conventional mortgage and ALSO deferring taxes? It could end up the property was worth considerably less than anticipated in the end.

I once knew someone who kept remortgaging his house ad infinitum. He bought it in his 30s or so, and still had a mortgage in his 80s. When he could no longer keep up with the payments, he transferred the ownership (and the mortgage) to his stay-at home employed son, and remained in the house until he died.

I have no intention of pursuing this. I don't think it likely I could qualify, among other things. Just wondering...

Why BC would allow this for people who can well afford to keep up is beyond me.

April 9, 2021
4:53 pm
Alexandra
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I agree Loonie, I think it is incredible that people can be very well off and yet not be required to pay their property tax. There was even an article in the Times Colonist, Victoria I think encouraging this.

Seems to me one of the rules are that you must have at least 25% equity in order to defer.

April 9, 2021
5:56 pm
Bill
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I wouldn't tell my heirs anything, that creates the impression you need to explain or justify any amounts they may be getting. As Loonie says, it's only the executor that has to know about the estate's liability, leave the heirs guessing (especially if any of them has anything to do with preparing your meals).

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