Deferring Your Property Taxes
It’s almost that annual time again…BC property tax time. Whether you’ve been deferring your property taxes for some time, or you are considering starting, it’s good to review if it (still) makes sense for you.
The BC Property tax Deferment Program has been around since 1974. It was started, in part, to help seniors who often found themselves in the position of being house rich yet cash poor. If you qualify for the deferral program, it means that you are able to postpone paying your property taxes in exchange for taking a simple interest loan at a low-interest rate. The loan would need to be repaid when you sold your property or sooner if you choose.
Simple interest means you are only charged interest on the principal amount you have deferred and not on top of the interest owed. This is much more attractive than the usual compound interest charged on standard loans & mortgages.
If you were able to take advantage of the regular deferment program from the last quarter of 2020 to September 2022, you were lucky enough to take advantage of a rate of 0.45%. Ahhh…the good ol’ days of ultra-low interest rates.
Since then, deferral rates have climbed as high as 5.20% (April 2024) but as of April 1, 2025 the regular program rate is down to 3.45%.
While the postponement of payments frees up cash in the interim, deferring your property taxes can quickly add up, especially as taxes rise with increasing value of BC homes.
Let’s look at an example. Say you qualify for the regular deferment program, your initial deferment amount was $5,000, and you want to defer your property taxes each year and expect this to increase at 2% per year. How does this add up?
If you had been deferring in this scenario for the past five years, using the historical rates you will owe approximately $52,700, by September 30th, 2025 (i.e. $52,000 of deferred tax over those years plus $700 interest). If you have been deferring for the past 10 years, this amount grows to approximately $110,600 (again, $109,500 deferred tax plus $1,100 interest).
Depending on your cashflow situation, you may be in a position where the best option is to continue or start deferring your property taxes. However, for others who have the choice to defer and redirect the funds to savings or investments, it’s important to look at whether it still makes sense given the rise in rates.
Whether you are considering the program for the first time, or you are already taking advantage of it, below are a few points to keep in mind:
- If you choose to invest your property tax savings, your goal should be to earn more than the interest you are being charged. If you are investing in something like a Tax-Free Savings account, this is straightforward. However investments in a non-registered account will incur income tax, so you will need to compare your investment earnings on an after-tax basis. For most investors, based on today’s rates, that likely means earning something around 5% pre-tax.
- As your loan increases each year, you will need to make sure that you maintain a minimum of 25% equity in the assessed value of your home. This includes any other debt registered against your property (e.g. mortgage and secured lines of credit)
- If you are looking to renew your mortgage with a new lender, or add something like a home equity line of credit, you may be required to repay your deferred property taxes at that time.
- With the deferral program comes a restrictive lien against your property. This means that property title changes are limited while you are in the tax deferment program. Title changes related to selling your property or adding another person other than your spouse to the property title, can’t be completed until your tax deferment loan is paid in full.
- The loan rate you receive when you start deferring is not a fixed rate. This means your loan rate will fluctuate with future rate changes.
As with any important financial decision it may be beneficial to talk with someone such as a family member or a financial advisor who can help determine if deferring your property taxes is right for you.