Canada Eliminates the Underused Housing Tax Starting 2025 — Homeowners No Longer Need to File the Annual UHT Declaration

The Underused Housing Tax was a federal 1% annual tax on the ownership of vacant or underused residential property in Canada, introduced effective January 1, 2022. According to the Department of Finance, its stated purpose was to ensure non-resident and non-Canadian owners of empty homes contributed their fair share and to keep housing available for Canadians.

The Compliance Trap

The problem was never really the tax itself. It was the filing requirement.

Under the UHT, every "affected owner" had to file a separate return for each residential property they owned as of December 31 of the calendar year — even if they qualified for an exemption and owed nothing. The annual deadline was April 30 of the following year. Miss it, and the minimum penalties were $5,000 for individuals and $10,000 for corporations, with higher penalties kicking in for returns filed more than eight months late.

That created a situation where the cost of non-compliance vastly exceeded the tax many owners would have owed. A Canadian who owned a cottage through a family trust and had no UHT liability whatsoever could still face a $10,000 penalty for simply not knowing they needed to file.

Who Was Actually Caught in the Net?

The UHT divided property owners into two categories: "excluded owners," who had no obligations at all, and "affected owners," who had to file regardless of whether they owed tax.

The vast majority of individual Canadian homeowners were excluded owners. But the system pulled in a surprisingly wide range of people who owned property through structures that weren't individuals — corporations (including numbered companies), trustees of trusts, and partners in partnerships. Even certain Canadian citizens and permanent residents could be classified as affected owners depending on how they held title.

The CRA extended the filing deadline for the first UHT year specifically because so many people struggled to determine whether they were affected — a tacit admission that the system had overreached.

The federal Notice of Ways and Means Motion for Budget 2025 adds provisions to the Underused Housing Tax Act stating that no UHT is payable for 2025 and subsequent calendar years and that no UHT return is required to be filed for those years.

Here is what that means in practice:

The distinction between "no tax payable and no return required" (effective immediately for 2025) and "full statutory repeal" (2035) is a legislative technicality. For homeowners, the practical effect is the same: the UHT is done. The change arrives during an uncertain period for the Canadian housing market, but it simplifies the compliance picture for property owners of all types.

This is the detail that matters most for anyone who may have missed a filing.

CRA's Excise and GST/HST News No. 121 explicitly confirms that filing, payment, penalties, and interest obligations for the 2022, 2023, and 2024 calendar years remain in effect. The repeal is forward-looking only.

If you owned residential property through a corporation, trust, or partnership during any of those years and were classified as an affected owner, you were required to file a UHT return for each property — even if you qualified for an exemption. If you didn't file, the penalties still apply, and CRA can still assess them.

The practical step: review your UHT filing history for 2022–2024 with your accountant. If returns are outstanding, filing late is still better than not filing at all.

If this experience has prompted a broader look at your property-related tax obligations, understanding how property tax assessments work is a good starting point.

The UHT was one piece of a broader federal strategy to address housing affordability and discourage vacant or underused residential properties. A Department of Finance briefing described the UHT as a tool to ensure non-resident owners pay their fair share, sitting alongside the Prohibition on the Purchase of Residential Property by Non-Canadians Act — the foreign buyer ban. That ban took effect on January 1, 2023, and has since been extended through January 1, 2027.

Bill C-15 also eliminates the federal luxury tax on specified aircraft and vessels, which KPMG's analysis of the enacted measures groups alongside UHT repeal and accelerated capital cost allowance for purpose-built rental housing. The pattern suggests a broader federal shift: away from niche, behaviour-shaping asset taxes that created compliance friction, and toward direct incentives for housing supply.

The recent elimination of HST on new home purchases up to $1 million is another example of that direction.

That said, the federal UHT was never the only vacant-property tax in play. Provincial and municipal vacancy taxes — including those in British Columbia, Toronto, and Ottawa — remain in effect and operate under entirely separate rules. The elimination of the federal UHT does not affect those obligations.

For most homeowners, the answer is simple: nothing.

If you were an excluded owner under the old rules — which includes the vast majority of individual Canadians who own their home directly — the UHT never applied to you, and its elimination changes nothing about your tax situation.

If you own property through a corporation, trust, or partnership:

1. Confirm 2022–2024 compliance. Check with your accountant that all required UHT returns for those years were filed. Late filing is still possible, and it stops penalty interest from growing.
2. Disregard 2025 UHT reminders. No return is required. No tax is payable. If you already filed, CRA will send you a cancellation letter.
3. Keep your records. The UHT Act remains technically on the books until 2035. While no obligations exist for 2025 onward, retaining ownership records for prior years is good practice.

Meanwhile, municipal property taxes remain a separate and growing cost for Canadian homeowners — Calgary recently finalized an 8.1% property tax increase driven largely by provincial education levies, a reminder that removing one tax obligation doesn't eliminate the broader cost pressures on property owners.