How HST Factors Into A New Home Purchase: Is It Included And What Is HST Rental Rebate?
In 2010, the province of Ontario raised the taxes on new homes from 5% (GST) to 13% (HST). However, there is good news. Homebuyers may be eligible for a rebate that would see them being reimbursed for a portion of those taxes.
What Is The HST Rebate And How Does It Work?
To encourage people to buy homes in Ontario (and discourage condo flippers), the provincial government offers an HST rebate for new home purchases. The rebate is available to those who purchase a resale home or condo or pre-construction property. For new homes valued at $400,000 or more, the maximum rebate amount for the provincial part of the HST is capped at $24,000.
When you buy a new home or condo, the price will include HST. However, when the HST is included it actually means that the non-rebatable portion of the tax is contained in the price. In Ontario, HST is 13% and it is the rebatable portion of the tax that you’re entitled a refund for.
Who Is Eligible For The Ontario HST Rebate?
In order to qualify for the rebate in Ontario, you have to buy a newly constructed home or condo, built a home yourself or contracted a builder to do so. Renovations also apply, but these need to be substantial renovations in which a new addition is added to your home or if the home had to be rebuilt due to fire destruction. If you converted a non-residential property into a liveable space or purchased shares in a new construction co-op housing project, you may also be eligible for the HST rebate.
One of the major stipulations of the rebate is that the property must be your primary residence. Only spouses, parents, grandparents and siblings who do not live on the property are eligible to receive the HST rebate. For instance if you are purchasing the home for an elderly parent or sibling with a disability, you can still apply for the rebate even though you are not going to be living in condo or house. Recreational properties like cottages do not qualify for the refund unless you plan on living there full-time.
A bonus of the HST rebate in Ontario is that you are not required to own the land that lies beneath your home in order to be eligible. This means that if you purchase a new mobile or modular home that is located on land you are leasing or renting, you can still apply for the rebate.
Citizenship And Residency Conditions
Ontario home buyers must present their citizenship and residency information to the government to receive the tax rebate. This condition was put in place in April of 2017 to manage the housing affordability crisis. Although the crisis is most notable in Toronto, you still have to provide citizenship and residency information no matter where in Ontario you are buying your property in order to qualify for the rebate. You’ll also need to provide additional information such as the type of dwelling (condo, semi-detached, detached etc.), and the reason for buying the property (to live in, for a disabled sibling, an investment etc.).
When Should You Apply For Your Rebate?
You must file your rebate claim within the two years following the closing of your new property. For new construction buildings, you have up to two years after construction has been completed to file your rebate request.
When Do You Receive The Rebate?
The HST rebate comes from the Canada Revenue Agency. Once you’ve filled out the appropriate paperwork, provided the required documents and submitted everything, it takes about two months for the review process to culminate. Generally, CRA will send you your tax rebate within 2-6 months.
What About Rental Properties? Are They Eligible For The Rebate?
We’ve covered how homebuyers can benefit from a tax rebate. But, what about those who are looking to purchase an income property? The Government of Ontario has put in place the New Residential Rental Property Rebate (NRRPR) to allow those looking to rent out a new home or condo to enjoy their own rebate. The NRRPR can only be applied by the buyer of the property after closing. While the NRRPR may be an incentive for more people to purchase new rental properties, keep in mind that you will need to pay the full purchase amount with the HST upfront, along with interest until your rebate is granted. Thus, if you are thinking of purchasing a property to rent out, apply for your NRRPR the moment you close to avoid paying exorbitant amounts of interest.
It may seem like a confusing process to apply for the HST rebate in Ontario. In reality, it’s simple and all you need to do is get the right documents in order and fill out the necessary forms. Please contact us for more information. If you’re looking to buy a new condo and are interested in the rebate, we can help.