If you are like me, you probably don’t like paying taxes. So, what if I told you there is a way to reduce the pressure of paying property taxes? Would you be interested?
Recent changes to the property tax rules can now help families manage their tax payments. There are some good strategies available, using either life insurance or tax deferral. Previously, property taxes could only be deferred under these circumstances: …widowed, disabled, or age 55 plus. But now parents with dependants under the age of 18 can defer property taxes, too. This program works really well for families planning to occupy the family home for a long time.
You may be thinking, “Even if I defer my taxes, they still have to be paid when the property is sold.” This is true, and this strategy alone is not advantageous for everyone.
But what if you could pay your taxes through an insurance policy costing only a fraction of the tax payments?
Here’s how it works:
Property taxes can be paid as part of your monthly mortgage payment or the home owner can pay annually. Let’s say you pay $6,000 annually on your property taxes, or $500 each month. You can take out a “Whole Life” insurance policy to cover the deferred tax payment costing a mere $80 a month. If something should happen to the policy holder (you), then the property taxes will be “paid off” by the insurance policy.
Or, if you decide to sell (after many years of appreciation), the back taxes owed must be paid off completely at the time of sale. This strategy is not for everyone and will take some planning. This strategy frees up $420 a month, which could be used to pay down your mortgage (and gain further savings on mortgage interest!); or, make room for other pressing expenses that many growing families struggle to pay. These numbers would be scaled to your particular situation, of course. *
Who, What, When, Where and How
55 and older – You or your spouse must be 55 years or older during that calendar year.
Surviving Spouse – You must be a surviving spouse.
Disability – To be considered for eligibility as a person with disabilities you are required to provide either:
- A copy of either a recent letter confirming your designated status of Person with Disabilities or your Release of Information Form from the Ministry of Social Development confirming you have the designation.
- A Physician’s Certification Form completed and signed by your physician. The form explains the disability eligibility criteria for the Property Tax Deferment Program.
For Families with kids under the age of 18
- You are financially supporting, at the time of application, a dependent child who is under the age of 18 at any time in the calendar year in which you apply, and who
· Lives with you full time in your home;
· Lives with you at least part time under a shared custody arrangement; or
· Does not live with you, but you pay support for the child, or are responsible for fees and/or living costs if they are attending school.
To qualify for these programs, you must meet the following criteria:
- Be a Canadian citizen or permanent resident who has lived in British Columbia for at least one year immediately prior to applying for tax deferment;
- Maintain a minimum home equity of 25% for the ‘55 & older,’ ‘surviving spouse,’ and ‘Person with a Disability’ categories, and a minimum equity of 15% for the ‘family program’ of the current BC Assessment value;
· You can only apply for your principle residence. (Secondary residences, such as summer cottages or rental properties, do not qualify for the tax deferment program.)
*I always recommend talking to professional advisors when considering more complicated strategies such as the one discussed above so you can make a truly informed decision that is right for you. Medical tests may be required for insurance.