How are Property Taxes adjusted when you buy a home?

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How are Property Taxes adjusted when you buy a home?

Adjustment of Annual Property Taxes

Most homeowners are aware that Property tax bills are issued in May and are due on July 1st. Many people assume that since property taxes are due on July 1st that they are adjusted based on that due date (i.e. July 1st, 2013 – June 31st, 2014). This is not the case. Property taxes in British Columbia are adjusted annually from January 1st – December 31st. Therefore, even though property taxes are paid in July, they are based on the calendar year.

So how do we adjust?

Every real estate contract has a Completion, Possession and Adjustment Date. The Adjustment Date is the date that is used to calculate property tax reimbursement for either the Buyer or the Seller. We do this so that each party is responsible only for the portion of the calendar year that they will own the property.

If you purchase your home before July 1st, or before the taxes are fully paid, you will be CREDITED the Sellers portion of the annual property taxes, as you will be responsible for paying the full amount of the annual property taxes.

However, if you purchase your home after the Seller has paid for the full tax year, you will be DEBITED your portion of the annual property taxes.


Example 1. Adjustment Date: March 1, 2013

2013 Taxes: $2000 less $570 (Home Owner’s Grant) = $1,430.00
January 1st to March 1, 2013 is 59 days
$1,430.00 X 59 days ÷ 365 days in a year = $231.15

In this case, the Buyer will be given $231.15 by the Seller on the Statement of Adjustments so that the Buyer can pay the full taxes when they are due.


Example 2. Adjustment Date: September 1, 2013

2013 Taxes: $2000 less $570 (Home Owner’s Grant) = $1,430.00
September 1st to December 31, 2013 is 122 days
$1,430.00 X 122 days ÷ 365 days in a year = $477.97

Here, the Buyer will give to the Seller $477.97 on the Statement of Adjustments to compensate the Seller for having already paid the taxes for the full year.

If you have any questions about the process of buying and selling property, please do not hesitate to send us a message or give us a call.


 

 

By | 2013-02-21T17:01:46-07:00 5:05 pm|Conveyancing, News and Updates, Taxation|