Vacant vs. Underused: Understanding Canada’s Empty Home Taxes

What Every Toronto Homeowner and Investor Needs to Know

As Toronto’s real estate market continues to evolve, two relatively new taxes have taken centre stage for property owners: the Vacant Home Tax (VHT) and the Underused Housing Tax (UHT). These taxes were introduced to increase housing supply by encouraging owners to either occupy or rent their residential properties — and to penalize those who leave them sitting empty.

Whether you’re a long-time Toronto resident, a seasonal investor, or an overseas owner, understanding the difference between these taxes — and whether you need to file — is critical to avoid unexpected costs and penalties.

Let’s break down what you need to know.

1. Vacant Home Tax (VHT) – Municipal Tax

The Vacant Home Tax is a municipal initiative introduced by the City of Toronto in 2022. Other cities, like Ottawa and Vancouver, have similar programs, but Toronto’s version specifically targets residential properties that sit unoccupied for more than six months in a calendar year.

Jurisdiction:

• Municipal (applies only within the City of Toronto limits)

Who Pays:

• All residential property owners, including Canadian citizens, permanent residents, and corporations

This tax applies regardless of your residency status. If you own a home or condo in Toronto, you must file an annual declaration — even if you live in it full-time.

Rate:

• 1% of your property’s Current Value Assessment (CVA) if it’s vacant for more than six months in a calendar year

• Toronto increased this rate to 3% starting in 2024 for properties that remain vacant

So, a home assessed at $1.5 million could face a $15,000–$45,000 tax bill annually if it remains empty.

 Declaration Requirements:

• Annual Declaration Deadline: Typically end of February (Feb 29 in 2024 for the 2023 tax year)

• If you fail to file, the City may assume your property is vacant and apply the tax automatically

Filing is simple and can be done online at:
👉 toronto.ca/services-payments/property-taxes/vacant-home-tax

 2. Underused Housing Tax (UHT) – Federal Tax

While the VHT is local, the Underused Housing Tax is a federal initiative that took effect in 2022. It’s designed to discourage foreign ownership of underutilized housing across Canada — but many Canadian-owned entities are still required to file, even if they don’t owe tax.

Jurisdiction:

• Federal, administered by the Canada Revenue Agency (CRA)

Who Pays:

• Primarily non-resident, non-Canadian property owners

• However, certain Canadian corporations, partnerships, and trusts are also required to file

This means that if your property is held in a corporation or trust, even if you’re a Canadian, you may still need to file a UHT return — or face stiff penalties.

Rate:

• 1% of the property’s value (either assessed or recent sale price, whichever is higher)

Example: A $1.2 million home could face a $12,000 federal tax bill if deemed underused.

Declaration Requirements:

• File CRA Form UHT-2900 annually

• Deadline: April 30 of the following year (e.g., April 30, 2024, for the 2023 tax year)

• Penalties:

• $5,000 minimum for individuals

• $10,000 minimum for corporations, even if no tax is owed

Filing is mandatory for affected owners, whether or not your property is underused.

More info from the CRA:
👉 canada.ca/en/revenue-agency/services/tax/businesses/topics/underused-housing-tax.html

Summary: Key Differences at a Glance

What You Should Do

If you own residential property in Toronto, make sure to:

• File your VHT declaration annually, even if you occupy the property full-time

• Check if you or your entity must file a UHT return, especially if you’re not a Canadian citizen or your property is held in a trust or corporation

• Avoid penalties by meeting deadlines and consulting a tax professional if you’re unsure