Property tax deferment assists seniors

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.

Property Tax Deferment is a low-interest loan program that assists qualifying homeowners in British Columbia in 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
  • Be 55 years of age or older OR a surviving spouse OR a person with disabilities as defined in the Regulations to the Land Tax Deferment Act
  • Be a Canadian citizen or permanent resident under the Immigration Act
    (Canada)
  • Have lived in British Columbia for at least one year immediately prior to applying
  • Apply on the home in which you live
  • Have a minimum equity of 25% in your home based on assessed values as determined by BC Assessment
  • Pay property taxes to a municipality or the Surveyor of Taxes
  • Have a current fire insurance policy on your home

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. A $10 fee applies to approved renewals.

For more information and how to apply, visit the Ministry of Small Business and Revenue’s website at www.sbr.gov.bc.ca/individuals/Property_Taxes/Property_Tax_Deferment/ptd.htm

You can also get information by email at ruraltax@gov.bc.ca or call toll free through Enquiry BC at 1-800-663-7867 and request a transfer to 250-387-0555.

Interest Charges

If you choose to defer your property taxes the deferred balance will be charged simple interest at a rate 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 Small Business and Revenue. 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.  Currently the interest rate is 4 per cent and is set for the period October 1, 2007 through March 31, 2008.  The rate may change every 6 months and will be reset again on April 1, 2008.

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 may make sense if an investor feels they could generate an after tax return greater than the interest charges.

2007 NUMERS FOR VANCOUVER ISLAND

Jurisdiction

Number of Households

Amount Deferred

Saanich

1226

3,723,526.07

OakBay

397

1,722,057.09

Nanaimo

608

1,476,037.12

Victoria

499

1,311,649.94

GulfIslands rural

377

1,062,124.15

North Saanich

297

1,036,382.67

Alberni rural

358

905,610.57

Courtenay rural

304

832,482.65

Central Saanich

233

677,423.29

QualicumBeach

293

642,293.37

Sidney

196

554,595.76

Duncan rural

237

520,359.86

Esquimalt

142

398,481.40

Parksville

177

370,281.98

North Cowichan

187

352,273.32

Courtenay

182

332,549.68

Nanaimo rural

136

330,322.49

Comox

169

309,192.76

Campbell River

158

278,931.66

Ladysmith

61

117,722.63

Colwood

66

111,855.34

Sooke

56

110,461.66

Langford

65

105,306.76

Lantzville

39

99,547.61

View Royal

56

93,768.79

Port Alberni

73

92,139.41

Source:  Ministry of Small Business and Revenue – Property Taxation Branch

Four 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 build up your investment savings.  Topping them up now may 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 RRSP contribution may be a prudent move.
  • Strategy 4:  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 financial advisor to see what course of action is appropriate for you.