Vacancy Tax in Toronto: What homeowners need to know

Toronto is one of the most vibrant cities in the world, with a thriving real estate market that continues to attract homeowners and investors alike. However, with rising housing prices, empty homes have become a growing concern for the city and its residents. In response, the city has introduced a Vacancy Tax, aimed at addressing the issue of empty homes.

So, what exactly is the Vacancy Tax in Toronto?

Simply put, it's a tax that's put on homeowners who leave their properties–usually second homes or investment properties–unoccupied for six months or more in a calendar year. This tax is calculated as 1% of the property's assessed value.

That means, for example, if the taxable assessed value of the property is $560,000, the empty home tax would be calculated as $560,000 X 1% = $5,600.

The Vacancy Tax is part of Toronto's larger effort to address the city's housing crisis, which has seen a shortage of affordable housing options. By imposing a tax on empty homes, the city hopes to encourage homeowners to either occupy their properties or rent them out.

So, what does this mean for homeowners in Toronto?

If you're a homeowner who frequently leaves your property unoccupied for extended periods, it's important to be aware of the Vacancy Tax and how it may affect you: 

1. The tax is calculated based on the property's assessed value, which is determined by the City of Toronto. If you're not sure what your property's assessed value is, you can find this information on the City's website or by contacting your local property tax office.
2. The Vacancy Tax is separate from any other property taxes you may owe. It's important to budget for this additional tax when planning for your real estate investments.
3. The City of Toronto will monitor properties to determine if they're occupied or not. If you're a homeowner who frequently leaves your property unoccupied, be prepared to provide evidence of your occupancy.
4. You won’t be subjected to the vacant home tax if your property serves as your primary residence or if it is occupied by a permitted primary resident. There are also other exceptions to this–like if the primary resident passed, there are extensive renovations, or the principal resident is in care. A full list of exemptions can be found on the City of Toronto website.

How you can declare the Vacancy Tax

As of 2023, all owners of residential properties in Toronto have to declare the occupancy status of their property. This declaration can be made through the city's online portal or, if you can’t make an online declaration, a paper declaration form can be obtained from the city's website. 

And, according to the vacancy tax bylaw, if you fail to submit your declaration on time, this may result in a fine of $250–plus, and your property will be considered vacant. So, it's important to stay on top of these requirements to avoid any potential penalties.

How you can pay the Vacancy Tax

If you realize you’ll have to pay this tax, you have a couple options to do so. One option is to use the MyTorontoPay portal, which allows for easy payment via e-transfers, debit, or credit card. Simply log in to your account, select the payment option, and follow the steps to complete the transaction. You will receive a confirmation email and a receipt of payment upon successful completion. 

Another option is to pay through your financial institution's online banking system, or via telephone banking, or in person. You’ll just need to provide your 21-digit assessment roll number from your Vacant Home Tax Notice.

You can also pay with a post-dated cheque, and mail it to:
Treasurer, City of Toronto, Box 5000, Toronto, ON M2N 5V1

What happens if you’re late to pay? 

Just a heads up, there may be a fee for some payment methods when it comes to paying your vacancy tax in Toronto. And it’s also important to note that if you're late on your payment, you'll have to pay some extra interest fees on top of what you owe, which will be tacked onto your property tax bill for that property. 

So, it's probably a good idea to pay on time to avoid any extra costs!

The bottom line

In conclusion, if you're a homeowner in Toronto, it's important to be aware of the Vacancy Tax and how it may affect you. Make sure to budget for this additional tax if you own a second home or rental property and be prepared to provide evidence of your occupancy if you leave your property unoccupied for extended periods.

And if you have any questions about how this tax might affect you–or if you have questions about any taxes in general related to your home, get in touch with one of Pine’s mortgage agents to help answer any of your queries.