The City of Toronto is introducing a vacant home tax in 2023 as a measure to increase the supply of housing in the city.  The City of Toronto vacant home tax is meant to discourage owners from leaving their residential properties unoccupied or face a hefty tax bill.  The vacant home tax is paid in addition to existing property taxes.

The Toronto vacant home tax can be substantial.  If you own a property in the City of Toronto and the property is vacant for more than six months, you could face a tax liability of 1% of the assessed value of the property.   For example, if your property is assessed at $1M, your vacant home tax bill would be $10,000 for the year.  Again, that is in addition to your property tax.

Beginning February 2023, all residential property owners in Toronto will be required to declare the status of their property(s) annually using a portal that the city will be launching in December of 2022.  Declarations must be made by the homeowner or someone acting on behalf of the owner and will determine whether the Vacant Home Tax applies and is payable.

Which situations will be subject to the vacant home tax?

A property is considered vacant if it has been unoccupied for more than six months during the previous calendar year or is otherwise deemed to be vacant under the bylaw.  The six-month period does not have to be consecutive and there are certain exemptions that may apply.

What if I have a rental property with vacant periods?

You can declare the property as “occupied as a tenanted property”. The property must be occupied by one or more tenants for six months or more throughout the year or potentially be subject to the vacant home tax.

What if my property is vacant due to renovations or construction?

You may receive an exemption under the bylaw, provided that your renovation project meets the following conditions:

a) occupation and normal use of the vacant property is prevented by the repairs and renovations;

b) all necessary permits have been issued for the repairs and renovations;

c) the City’s Chief Building Official is of the opinion that the repairs or renovations are being actively carried out without unnecessary delay.

Are there any other exemptions to the vacant home tax?

Yes, there are several other exemptions such as the death of the principal owner, if the principal resident is in a care facility, if legal ownership was transferred in the previous year, if the property is required for full-time employment, or if there is a court order that prohibits the occupancy of the property.

What if I fail to fill out a declaration for my property?

According to the City of Toronto, failing to declare your property’s status by the deadline of February 2, 2023 is subject to a $250 fine to the property owner.  If the property owner is found to make a false statement on the declaration, they could face a $250 to $10,000 for each offence.

How will the city know that a property is vacant?

It is not yet known how the city plans to inspect or enforce the status provided in the annual declaration. However, according to the City of Toronto’s website, they may audit your declaration, asking for documentation to prove the occupancy of the property.  Such documentation may include:

• An Ontario vehicle registration and vehicle insurance documentation of any occupant and owner.
• Government-issued personal identification, including driver’s license and Ontario Identity Card of any occupant and owner.
• Proof of Ontario Health coverage or valid Health card of any occupant and owner.
• Income tax returns and income tax notices of assessment of any occupant and owner.
• Lease agreements for the residential property.
• Wills, grants of probate, or grants of administration in respect of an owner or an owner’s estate.
• Employment contracts, pay statements or records of employment of any occupant and owner.
• Verification of residence in a hospital, long-term or supportive care facility in respect of an owner.
• Court orders prohibiting the rental of the residential property.
• Insurance certificates for homeowner’s or tenants’ insurance.
• Statutory declarations or affidavits regarding the occupancy of the residential property and any exemption.

The Bottom Line

If you own a property in the City of Toronto, keep an eye out for the upcoming declaration deadline.  If you have a property that is not your principal residence that will be vacant for more than six months in a tax year, the City of Toronto vacant home tax can be substantial, so keep it in mind as you consider buying a property in the City of Toronto.

Important note: This article is not Legal Advice. No one should act, or refrain from acting, based solely upon the materials provided on this website, any hypertext links or other general information without first seeking appropriate legal or other professional advice.