HST and the New Housing Rebate
By Alleen Sakarian, Devry Smith Frank LLP
What is HST? Harmonized Sales Tax (HST) is a combined tax which, in Ontario, includes an 8% provincial tax component and a 5% federal tax component. HST is levied on all new home purchases in Ontario, substantially increasing the cost of buying a new home in the province.
The HST is built into the purchase price and the rebate is assigned to the Vendor. If the purchaser does not qualify for the rebate, the vendor will charge an amount equal to the rebate to the purchaser as an adjustment on closing. It is important to note that this is an adjustment on closing which cannot be factored into the mortgage. In other words, the purchaser must budget for this additional charge on closing. Note that resale homes are not subject to HST.
Who should be aware of this tax?
Anyone interested in purchasing in the pre-construction market, in the market for a newly built home, or interested in substantial renovation of an existing home should be aware of this tax as well as their eligibility for a rebate.
What is the HST New Housing Rebate?
Eligible new home buyers can claim the New Housing Rebate for 36% of the Federal component of HST paid for the pre-tax amount less than or equal to CAD 350,000. The amount is gradually clawed back from the amount paid between CAD 350,000 and CAD 450,000, with no further rebates offered for any amount in excess of CAD 50,000. The rebate for the Federal portion maxes out at CAD 6,300.
Additionally, a new home buyer can claim a rebate of 75% of the Provincial component of HST. The rebate is applicable regardless of purchase price, but maxes out at CAD 24,000. It is important to consult with accounting and legal professionals to ensure good tax planning.
Published: September 2017 l Photo: bakerjarvis - Fotolia.com