The Underused Housing Tax: Who Had to File for 2022–2024 — and Why It's Now Eliminated

Short version: Underused Housing Tax Explained for Non-Resident Owners

The headline first: Budget 2025 eliminated the Underused Housing Tax for the 2025 calendar year and every year after — no UHT is payable, and no UHT return has to be filed, for 2025 onward (the change was tabled in November 2025 and enacted in 2026). What remains is a closed legacy window: the UHT applied for the 2022, 2023, and 2024 calendar years, and those returns, exemptions, and penalties stay fully in force — an unfiled 2022–2024 return is still owed and still carries its minimum penalty. So the UHT is now a three-year catch-up problem, not a forever-tax; everything below is the sort that governed those three years and still governs any late filing for them.

The UHT was two obligations wearing one name: a 1% tax that most affected owners never paid, and an annual return that every affected owner had to file — with minimum penalties for non-filing that dwarfed the tax the return usually showed as zero. The sort began with owner categories on December 31 of each of the three applicable years. Excluded owners — no return, no tax: Canadian citizens and permanent residents holding directly, and (following the amendments that drained the early compliance panic) specified Canadian corporations, partners of specified Canadian partnerships, and trustees of specified Canadian trusts for the later of those years — the categories that pulled most Canadian-controlled structures out of the filing net after the first cycle caught them. Affected owners — return required for each applicable year, tax unless exempt: the regime's targets — non-resident non-Canadian individuals (the American with the Muskoka cottage; citizenship controlled, so a Canadian citizen anywhere was excluded while the US-citizen-only owner was affected wherever they lived), foreign corporations, and the residual structures outside the specified-Canadian carve-outs. For affected owners the exemption map then decided the tax while never touching the return: primary-place-of-residence and qualifying-occupancy exemptions (the property lived in by the owner, spouse, or qualifying tenants for the required periods); the vacation-property exemption — the one recreational owners leaned on — for properties in eligible areas (the prescribed rural/less-urban geography, testable parcel-by-parcel through the CRA's designation tool) used personally the requisite weeks; newly-constructed, seasonal-inaccessibility, disaster, and death-year exemptions filling the edges. The mechanics: a return per owner per property (co-owners each filed), due April 30 of the following year, requiring a Canadian tax identifier (the ITN application for Americans without one was the lead-time item), with the tax — where owed — at 1% of the greater of assessed value and most recent sale price (or elected FMV), prorated to ownership share. The penalty architecture was the point: minimum penalties per unfiled return (set at C$1,000 for individuals and C$2,000 for corporations at the minimums, higher amounts computable), and — the provision that converted casualness into real money — an unfiled return could void the tax exemptions for that year, turning a zero-tax vacation property into a 1% assessment plus penalty because a form didn't go in. These penalties still bite for 2022–2024: eliminating the tax for 2025 onward did nothing to forgive an unfiled 2023 return. The cross-border coordination notes: the UHT return was a Canadian excise filing that didn't touch the US side (no credit, since for the exempt majority there was no tax; where the 1% was actually paid on a rental property, its deductibility as a carrying cost was its own analysis); the provincial and municipal vacancy taxes (BC's speculation and vacancy tax, Toronto's and Vancouver's empty-homes declarations) are separate regimes with separate declarations that survive the UHT's elimination — the American owner in the wrong city can still owe those annual filings on one cottage; and the ownership-structure decisions from the buying playbook echoed here — the personal-title American filed one UHT return, while the entity structures the corridor keeps warning against multiplied the categories, the returns, and the penalty surface.

Key takeaways

• Eliminated for 2025+, alive for 2022–2024: Budget 2025 (enacted in 2026) removed the UHT for 2025 and later years — no tax, no return. But the 2022, 2023, and 2024 obligations survive in full, so an unfiled return for those years is still due and still penalized.
• Category first, each applicable December 31: excluded (Canadian citizens/PRs and the specified-Canadian structures — no filing) versus affected (non-resident non-Canadians and foreign entities — return per property, tax unless exempt). Citizenship controlled for individuals; residence didn't rescue the non-citizen and didn't condemn the citizen.
• The return filed even at zero: exemptions eliminated the tax, never the filing — and the design's teeth were the minimum penalties plus the exemption-voiding consequence of late returns, which could manufacture the 1% on property that owed nothing. That consequence still applies to the legacy years.
• The vacation-property exemption was parcel-tested: eligible-area geography (checked against the official designation tool, not the listing) plus the personal-use weeks — documented for each year it was claimed.
• Mechanics with lead times: ITN applications for first-time American filers, per-owner-per-property returns, April 30 deadline, the value base (assessed vs sale price, FMV election available) chosen deliberately where the 1% actually applied.
• Stacked regimes outlive the UHT: BC speculation/vacancy and municipal empty-homes declarations are separate annual filings that continue after the UHT's elimination — the wrong postal code still means multiple calendars for one property.

The legacy filing routine (2022–2024)

There is no going-forward UHT calendar anymore — 2025 and later years require nothing. What remains is catch-up: for each of 2022, 2023, and 2024, confirm the December 31 category (any citizenship or structure changes across those years?); run the exemption analysis year by year (occupancy logs, the vacation-area confirmation, tenancy records); prepare the return(s) — per owner, per property, per year — with an ITN in hand; and file any that were missed, because the penalties keep running until the return goes in. For couples and co-owners, the count multiplied by title across those three years. The stacked provincial and municipal declarations (the BC speculation and vacancy tax, Toronto's and Vancouver's empty-homes declarations) still run annually on their own rules and belong in the same sitting — those did not end with the UHT.

Worked example

Three owners of Canadian recreational property, sorted across the UHT's three live years (2022–2024). Owner one: a dual US-Canadian citizen with a Whistler condo — excluded owner (Canadian citizen); no UHT return in any year; her only annual declaration was BC's speculation and vacancy tax form, which runs on its own rules and survives the UHT's elimination, so her February sweep still catches it. Owner two: a Michigan couple (both US-only citizens) with the Georgian Bay cottage from the buying example — affected owners, two returns each year; the vacation-property exemption's area test was documented at purchase and the use log showed the qualifying weeks: tax zero, both returns filed each April for 2022, 2023, and 2024 with ITNs obtained in the first year; across the regime's whole life their total UHT paid is C$0 and their total filings are six — the regime working exactly as designed for the compliant, and nothing further owed once it was eliminated for 2025. Owner three: their neighbor, same lake, same facts, who never heard of the UHT until a CRA letter — two owners, three years each, returns never filed: minimum penalties assessed per return, and the late-filing exemption-voiding rule applied to manufacture the 1% on top before a relief request, grounded in the regime's genuine novelty in its early years, walks back part of the damage. The sting the elimination doesn't remove: those 2022–2024 penalties stand regardless of the tax ending in 2025. The delta between owners two and three was never tax — it was a February calendar entry and a few forms, which is the UHT's whole lesson in one lake.

Official sources

The Underused Housing Tax was a "1% tax on the ownership of vacant or underused housing in Canada," under which affected owners filed a return for each residential property even when an exemption eliminated the tax. Budget 2025 eliminated it: "no UHT is payable, and no UHT return is required to be filed in respect of the 2025 calendar year or subsequent years." The tax and its filing obligations continue to apply only to the 2022, 2023, and 2024 calendar years. — Canada Revenue Agency, Excise and GST/HST News No. 121 (Underused Housing Tax), https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/news121/news121-excise-gst-hst-news-no-121.html

Under the Prohibition on the Purchase of Residential Property by Non-Canadians Act (in effect until January 1, 2027), non-Canadians are prohibited from purchasing residential property located within a census metropolitan area or census agglomeration, subject to exceptions (certain work-permit holders, students, refugees, and spousal purchases). "If a non-Canadian, or anyone who knowingly assists a non-Canadian, is convicted of violating the prohibition, they will have to pay a fine of up to $10,000. Additionally, a court can order the sale of the residential property." — Canada Mortgage and Housing Corporation, Prohibition on the Purchase of Residential Property by Non-Canadians Act, https://www.cmhc-schl.gc.ca/professionals/housing-markets-data-and-research/housing-research/consultations/prohibition-purchase-residential-property-non-canadians-act

Practitioner note

The UHT was a filing regime disguised as a tax: the 1% rarely applied to anyone who filed, and the penalties reliably applied to anyone who didn't — and for 2022–2024 those penalties still do, even though Budget 2025 ended the tax for 2025 on. Our legacy-UHT work is category-exemption-calendar across the three live years — citizenship sorted first, the vacation-area test documented parcel-by-parcel, ITNs obtained for any missed return — and our stacked-regime sweep catches the BC and municipal declarations that share the property but not the paperwork and that outlive the UHT. The return is the product; the zero on it is the expected result.

See also: For the pre-closing checklist for a Canadian buying US property, see the pre-closing checklist for a Canadian buying US property; and browse every cross-border tax topic guide, organized by situation.

Next step

Fairlight prepares the UHT legacy compliance — owner-category and exemption analysis for 2022–2024 with area-designation testing, ITN applications, any missed-return catch-up, and the stacked provincial and municipal declaration sweep that outlives the tax. See cross-border pricing or book a call.