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A property tax expert is warning about the B.C. government’s recent changes to its property tax deferral program and its impact on seniors.
The provincial government allows eligible homeowners to defer their annual property taxes, essentially taking out a loan that is repaid when the home is sold.
However, in the latest budget, the BC NDP government overhauled the program with significant consequences.
“What I fear is folks such as our seniors in our communities won’t understand the math,” Paul Sullivan with Ryan Tax Firm said.
The interest rate was hiked from prime minus two per cent to prime plus two per cent.
However, the biggest change is how that interest is calculated. Instead of simple interest, it now compounds like a mortgage and the impact can be dramatic.
Under the old system, a homeowner would lose about seven per cent of their equity after deferring taxes for 17 years.
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Under the new program, that number is roughly 10 times higher. The same homeowner could now lose up to 70 per cent of their equity.
According to Sullivan, seniors, who make up the majority of those using the deferral program, haven’t been clearly informed about what these changes mean.
“I think a lot of people in the program are there because they need it,” he said. “And they need to go in with their eyes open and understand the position they’re putting themselves into.
“The tax debt and the interest cost will take you to the point where you must sell your home, or at least you cannot qualify for any more debt at year 17.”
At the time, Finance Minister Brenda Bailey said the changes were meant to prevent people from gaming the system.
B.C.’s Seniors Advocate said the change in the recent budget is enough for them to draw attention to the issue.
“Most of us don’t want to accumulate any more debt, certainly when we’ve paid off most or all of a mortgage,” Dan Levitt said.
“We are concerned that we will see less people using the property tax deferral program than we have in the past, based on these changes that were made.”
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