arthurzhao.realtor
Toronto’s Vacant Home Tax is 3% of your property’s Current Value Assessment (CVA) for each year the home is deemed vacant. Most buyers who plan to live in the property have nothing to worry about — but you must file an annual declaration by February 28 each year or you will be billed by default. Understanding the rules around brief post-closing vacancies, how to claim the principal residence exemption, and how responsibility is split between buyer and seller will protect you from unnecessary surprises.
What Is Toronto’s Vacant Home Tax?
Toronto’s Vacant Home Tax (VHT) is an annual levy on residential properties that are deemed vacant for more than half of a calendar year. The City of Toronto introduced the VHT in 2022 to discourage long-term vacancy and increase the supply of housing available for occupancy.
According to the City of Toronto (2024 policy), the VHT rate is 3% of the property’s Current Value Assessment (CVA). The CVA is determined by MPAC (Municipal Property Assessment Corporation) and reflects an estimated market value as of the last general assessment — it is typically lower than actual sale prices in rising markets.
The VHT applies to all residential properties in Toronto — houses, condos, and other dwellings — unless a valid exemption is declared. The tax is in addition to regular property tax (not a replacement for it).
What Counts as “Vacant” Under the VHT?
A residential property is deemed vacant if it is not occupied as a principal residence or a residential rental for more than 183 days (approximately 6 months) in a calendar year. This is the key threshold that determines whether the tax applies.
- Principal residence occupied 183+ days/year
- Property rented to a tenant under a residential lease
- Undergoing major renovations with a permit
- Ownership transferred (sold) during the year
- Owner deceased during the year
- Court order or legal proceeding in effect
- Property held but left empty for investment
- Seasonal or occasional use below 183 days
- Property unoccupied while listed for sale
- Purchased but owner moved in less than 183 days
- Failed to file annual declaration (deemed vacant by default)
The default rule is critical: If you do not file your Annual Property Status Declaration, the City of Toronto will automatically deem your property vacant and issue a VHT assessment. You then have to appeal and prove your status — which takes time and creates unnecessary stress. Filing takes minutes and is free.
4 Buyer Scenarios — How VHT Applies to You
The VHT rules look different depending on your specific closing situation. Here are the most common buyer scenarios.
How to Declare the Principal Residence Exemption
If you live in the property as your primary home, the principal residence exemption eliminates your VHT liability. Here is how the declaration process works in Toronto:
The declaration is an annual requirement — it does not carry forward from year to year. If you declared “Principal Residence” last year, you must declare it again this year. Set a calendar reminder for January to avoid missing the February 28 deadline.
Seller vs Buyer Responsibility — How It’s Divided
One of the most common sources of confusion in real estate transactions involving VHT is understanding who is responsible for what. Here is how it works:
- File VHT declarations for all years prior to closing
- Ensure no outstanding VHT liabilities exist on title
- Provide documentation of property use status upon request
- Declare the property status for the closing year up to the transfer date (or confirm the year-of-sale exemption applies)
- File the annual declaration from the closing year onward
- Update property tax billing records with new ownership information
- Declare principal residence, rental, or other applicable exemption
- Meet the February 28 deadline each year
The closing year is the most complex. Both parties have a stake in ensuring the declaration is handled correctly. Your real estate lawyer will typically verify whether there are any outstanding VHT liabilities during the title search process and may include a seller representation confirming clean VHT status in the closing documentation.
Contract tip: Ask your realtor to include a clause in the Agreement of Purchase and Sale requiring the seller to confirm there are no outstanding VHT assessments and that all annual declarations have been filed. While your lawyer’s title search will cover this, having it as a contractual representation adds an extra layer of protection.
Outstanding Vacant Home Tax liabilities can run with the property. If a seller has failed to file declarations or has accrued VHT assessments that have not been paid, those obligations may transfer to the buyer as an encumbrance on title. Always instruct your real estate lawyer to conduct a thorough title search that includes checking for outstanding VHT liabilities — especially when purchasing from estates, long-term absentee owners, or investors.
Frequently Asked Questions
In most cases, no. Toronto’s VHT is calculated on a full calendar year basis. As long as you occupy the property as your principal residence for more than 183 days in the tax year, you qualify for the principal residence exemption. A brief gap between closing and move-in typically does not trigger the tax. However, you must file your annual declaration by February 28 of the following year — failing to do so results in the property being deemed vacant by default.
Toronto’s VHT rate is 3% of the property’s Current Value Assessment (CVA), as set by the City of Toronto’s 2024 policy. The CVA is determined by MPAC and is typically lower than the market purchase price. For a property with a CVA of $800,000, the annual VHT exposure if deemed vacant would be $24,000 — a significant amount that underscores why timely declaration is so important.
Responsibility is divided by ownership period within the tax year. The seller is responsible for the period they owned the property and for ensuring all prior years’ declarations are filed and any outstanding liabilities are cleared before closing. The buyer takes on responsibility for annual declarations from the closing date forward. Both parties should work with their lawyers to confirm the closing year declaration is properly handled, particularly for late-in-year transactions.
Discover more from GTA Real Estate Broker | Arthur Zhao
Subscribe to get the latest posts sent to your email.
