HST Rebate in New Condo & Home Sales Explained...
People acquiring brand new property in the GTA for investment purposes pay tens of thousands of dollars in HST, so it is very important that they file for a new house rebate otherwise they will not get a single dollar back. Many new Canadians are unaware of the rebate since they are not always familiar with the Canadian property market and tax code, but in most cases their real estate agent will advise them of the rebate during the purchase process.
When it comes to condo investing one of the most confusing and most misunderstood subjects is HST and HST rebates.
HST Rebate Explained:
The HST Rebate has been around now since mid-2010 since CRA introduced the HST system in Ontario. The rebate is to discount first time home buyers or investors of real estate on the HST portions of their purchase as long as certain conditions are met.
First let’s talk about the discounting element. There are two important factors GST (5%) & PST(8%)
Federal Portion ( 5%- Rebate of 36% to Max $6300) The GST credit has been around for a long time and hasn’t changed it is 36% of the actual GST portionpaid on a new purchase. However there is a restriction on any purchase over 350,000 the GST credit will start decreasing until it reaches 450,000 where it becomes 0.
Provincial Portion ( 8%- Rebate of 75% to Max $ 24,000) The PST Provincial portion of the tax is 75% of the actual amount paid capped at 400,000. What this means is that if you buy a property over 400,000 you will still be eligible for 75% of the 8% provincial tax paid.
Let’s look at a couple of examples.
Purchase price of property 350,000 + HST ( GST 17,500 PST 28,000) The credit for such a purchase would be 36% of the 17,500 = 6,300 and 75% of the 28,000 = 21,000 therefore a total of 27,300.
Purchase price of property 450,000 + HST ( GST 22,500 PST 36,000) The credit for such a purchase would be 36% if the 22,500 but since the property value is 450,000 the credit get’s reduced to 0 and 75% of 36,000 which would be 27,000 but since the PST is capped at the PST of a 400,000 the total PST credit would be 24,000.
Now this credit is available for both first time home buyers and those that are purchasing properties as an investment the only difference is the forms that have to be filled out for these credits.
If you have purchased a brand new home or a condo from a builder in the past 2 years you are qualify for an HST Rebate of up to $30,000. Most builders claim the rebate on behalf of purchasers that are living in their new home or a condo as their principal residence.
The HST Rebate on condos is split to 2 scenarios :
1. If you bought a brand new condo from the builder and moved in to the unit as your principle residence, the builder will credit you the rebate upon closing.
2. If you bought a brand new condo from a builder as a rental property and never moved in yourself, the builder will demand that you will pay the HST on the unit PRIOR to closing.
New condominium and home investors that rent out their units are being disallowed for the rebate by the builder but can still claim their rebate through the HST Rental Rebate program.
In order to obtain the HST Rental Rebate, the owner must provide your accountant or lawyer the following documents:
- Copy of the agreement of purchase and sale.
- Copy the closing statement of adjustments.
- Copy of a 1 year lease agreement.
-Form GST 524 New Residential Rental Property Rebate Application
Common Questions : Do I have to pay an extra 13% on final closing if I’m an investor of a new condo?
Answer: No. What happens is, the first 5.2% of the HST is built in to the price and the builder’s paying that. On closing, you’re going to pay 7.8% of the purchase price. If you buy a property for 200,000 you’re going to pay $15,600 in HST on closing, which you can get back. For a condo $300,000 you’re going to pay $ 24,000 ( i.e .7.8% or let’s call it 8%)
If you need help with a good Tax Consultant to claim HST Rebate, Call Us !
>Mark Purdy , Tax Consultant . www.RentalRebate.ca is a good one !
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