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Should I Defer My Property Taxes?

April 2, 2018 by Editor

For a lot of people it makes really good financial sense to defer your property taxes. This is especially true of seniors who have lived in their home for many years, are mortgage-free, and now see their property values (and taxes) increasing at the same time as their income declines.

Low Interest Financing

An important note here is that your municipality continues to get all their full taxes – paid on your behalf by the provincial government, and financed at a very low interest rate (currently only 0.7% per year, not compounded). You don’t have to pay the taxes – and the small interest – until your home is sold.

Because the interest rate on the deferred property taxes is so low, even a tiny increase in your home’s value will easily offset it. The chart below shows a couple of scenarios for a 20 year deferral (say, someone who is 65 and planning to defer taxes until age 85 when ready to sell their home).

In the meantime, for the 20 years or so, you will have access to additional cash every year for your own use instead of the government’s. If you don’t need the extra money, lucky you, then you can invest it and easily earn more than enough to pay the taxes when they finally become due on the sale of your home.

Or you might want to put the equivalent amount in a tax-protected RESP for your grandchildren?

Tax Deferral Analysis

 

Scenario 1

Scenario 2

Assessed Value today

$2,000,000

$2,000,000

Annual Property Taxes

$8,000

$12,000

Number of years deferred

20

20

Annual interest rate

0.70%

3.00%

Annual interest amount

$56

$360

Total interest

$1,120

$7,200

Back Taxes Payable after 20 years*

$161,120

$247,200

Annual Rate of Increase in Value

2%

1%

20-year Increase in Value

$913,622

$416,218

* Or whenever the home is sold or ownership is transferred

Scenario 2 is more pessimistic, with higher annual property taxes, significantly higher annual interest on the deferred amounts, and an exceptionally low annual increase in value in the property.

Even then, the lift in value on the property is much higher than the total amount of deferred taxes plus interest.

Find the full details by searching

“bc property tax deferment”.

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Filed Under: Real Estate Perspective

The News – and the Reality: Trends Affecting Real Estate

November 21, 2018

One of the most popular activities in the daily news cycle seems to be forecasting the future of real estate. And it’s not uncommon to see wildly opposing views on where the market is headed, and when it might get there. This month’s post explores the news — and the reality.

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The Changing Market – What Does That Really Mean?

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Read More

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October 9, 2018

Talk to a mortgage broker if you plan to move. There is still a strong demand for housing especially in retirement and recreational properties.

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Shannon Realty

Suite 207 5740 Cambie St.,
Vancouver, BC. V5Z 3A6
1-604-649-6058

Email: jeff@shannonrealty.ca

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