Are you exempt from the Speculation and Vacancy Tax? 2026 changes and what you need to know….
Did you know that the Speculation and Vacancy Tax is changing in 2026? If you own a home in British Columbia, it’s important to stay up to date with any changes to the taxes you pay and avoid unwelcome surprises. Here are the upcoming changes in 2026, and how to find out if you qualify for an exemption.
Speculation and Vacancy Tax Overview
The Speculation and Vacancy Tax was introduced in 2018 as part of efforts to increase the availability of affordable housing and ensure fair contributions to the B.C. tax system. The amount of tax that you have to pay depends on whether you are a “specified” Canadian citizen or permanent resident—that is, whether your reported total income in Canada is greater than your unreported income.
Every year, declarations are due on March 31, and payment of the tax is due on July 2. You pay for the calendar year prior, so, for example, payment for the 2024 calendar year will be due on July 2, 2025. You also need to file a declaration every year, even if your situation hasn’t changed.
Importantly, the Speculation and Vacancy Tax is different from the Empty Homes Tax. The Empty Homes Tax is a Vancouver bylaw that only applies within the City of Vancouver, while the Speculation and Vacancy Tax applies across British Columbia. Similar pieces of legislation have been introduced across Canada, including the federal Underused Housing Tax, which generally applies to foreign national owners of housing in Canada. It is important for you to ensure you file a declaration for, and pay, all necessary taxes.
Upcoming Changes in 2026
The amount you pay under the Speculation and Vacancy Tax is calculated using the following formula:
tax payable = tax rate × (owner’s interest × assessed value)
Effective January 1, 2026, the tax rate will change. For foreign owners, and untaxed worldwide earners (people whose unreported income in Canada is greater than their reported total income in Canada), the new tax rate will be 3% of the property’s assessed value. For specified Canadian citizens and permanent residents, the new tax rate will be 1%. This is an increase from the previous rates of 2% and 0.5%, respectively.
Exemptions From the Speculation and Vacancy Tax
Understandably, you may be curious about how to get an exemption from this tax. Below are some of the more common possible exemptions for BC homeowners.
1) Year of Acquisition
If you buy a home and pay the appropriate taxes on the purchase (or if you qualified for an exemption from those taxes), you are exempt from the Speculation and Vacancy Tax on that home for the calendar year.
2) Tenanted Residential Property
If your home is rented out to a tenant for six months or more during the calendar year, you may also be exempt from the Speculation and Vacancy Tax.
There are specific requirements depending on whether your tenant is ‘arm’s length’ or not. An arms length tenant is someone who doesn’t have any unfair advantages in their dealings with you, because they are not your sibling, spouse, friend, or relative.
On the other hand, a non-arm’s length tenant is someone who does have an advantage because they are closer to you. If you rent out your home to a non-arm’s length tenant, in order to qualify for a tax exemption, that person would have to be a resident of British Columbia on December 31 of that calendar year.
In addition, if you are not a specified Canadian citizen or permanent resident, there is a further income requirement. If you are renting out a detached house, cottage, other single family dwelling, dwelling in a strata lot, or an apartment inside a duplex or any of the above, the income that your non-arm’s length tenant earns within British Columbia must be at least six times the annual fair market rent for a comparable residence. For any other residence, the tenant’s income within British Columbia must be at least three times this value.
3) Breakdown of Marriage or Common-Law Partnership
In some situations, you can be exempted from the tax if you and your spouse own family property but have since begun living separately. For example, if you and your spouse owned a house together, but your marriage broke down and you began living apart from your spouse for at least 90 days within the calendar year, and you did not reconcile with your spouse by December 31 of that year, you may be exempt from the tax.
4) Death
If someone else who owns a home with you dies, or if you acquire a home as part of the distribution of the estate of someone who has died, you are exempt from the tax for that calendar year.
Conclusion
Buying, owning, and renting out residential property are rewarding endeavours, but there can be serious consequences if you do not comply with the appropriate legislation. An experienced real estate lawyer can assist with your purchase, sale, or lease, ensuring a less stressful and more efficient experience for you.