Canada's New Luxury Tax Just Kicked In & Here's What's Going To Cost Even More
Were you saving up for something special?
Canada's Luxury Items Tax has just come into effect and the cost of select items are going to go way up.
The new policy specifically targets cars, aircrafts and boats that exceed a certain price tag. For cars and aircraft, this limit is $100,000, while for boats the limit is $250,000.
Those planning to purchase these big-ticket items will now be liable to pay a tax that is either 10% of the total taxable amount or 20% of the amount above the price threshold — whichever is lower.
Confused? Well, here's how it works. Say you wanted to splurge on a luxury car that costs $150,000, you'd first have to calculate
- 10% of the cost ($15,000)
- 20% of $50,000 (the difference between $150,000 and $100,000), which is $10,000
You would then be liable to pay the lower amount of the two. So, in this case, the car buyer would pay $10,000 in tax as that's the lesser of the two figures.
That's not great news if you've been saving up for a big splurge on a luxury item.
When it comes to vehicles, the tax applies to any sedans, coupes, hatchbacks, convertibles, sport utility vehicles and light-duty pickup trucks bought for personal use.
The tax doesn't make an exception for electric vehicles either, many of which go above the $100,000 price tag.
Some other stipulations include that it has to be able to seat no more than 10 people and have a manufacturing date after 2018.
Some vehicles that will not be taxed include motorcycles, snowmobiles, ambulances, police cars, fire trucks, military vehicles and RVs.
When it comes to boats, the tax will apply to yachts, sailboats and motorboats, but not to floating homes or ferries.
The government has cited COVID-19 as one of the reasons behind Canada's luxury tax.
In a statement released in August, the feds stated that "Some Canadians have lost their jobs or small businesses, while some sectors of the economy have flourished."
"That's why it is fair today to ask those Canadians who can afford to buy luxury goods to contribute a little bit more."
This article's cover image was used for illustrative purposes only.
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