Whether you're a seasoned investor or venturing into the realm of real estate for the first time, understanding the intricacies of purchasing a new property is crucial. Today, we delve into a topic that has significant financial implications for Ontario home buyers: Harmonized Sales Tax (HST) rebates.
Since the summer of 2010, buyers of new built homes in Ontario have been subject to a 13% HST on their purchases, comprising a 5% federal tax and an 8% provincial tax. But fear not, as both the Ontario and Federal governments offer rebates to ease the burden and promote ownership of property.
Provincial Portion: Buyers can receive a generous 75% rebate on the provincial portion of the HST and its applicable to new home purchases up to $400,000. This translates to a maximum provincial rebate of $24,000, with no claw back if the purchase price exceeds the $400,000 threshold.
Federal Portion: For the federal portion (5%) of the HST, rebates are available up to 36% for purchases with a pre-tax price equal to or less than $350,000. The rebate gradually diminishes for purchases between $350,000 and $450,000, ceasing altogether beyond $450,000. So, the maximum federal rebate ($6,300) is available at the purchase price of $350,000.
Now, let's talk about when and how you can claim these rebates as they differ based on the occupancy status of the new home.
Owner Occupied: If you are buying the new home with an intention to make it your principal home, then builders often integrate the rebate into the listed price of the home. This means that upon signing the agreement, the builder deducts the HST rebate amount from the purchase price and will in turn claim the deduction, simplifying the process for you. Just ensure to verify this inclusion in your purchase agreement.
Investment Property: If you're purchasing the new home to rent it out or as an investment, claiming the “Ontario New Residential Rental Property Rebate” is your responsibility post-closing. Builders do not handle this rebate for investment properties. You'll need to be prepared to pay the full HST on closing and apply for the rebate afterward. Usually, this means that you will need to pay up to $24,000 on top of the purchase price on closing to adjust for the rebate later. Remember to verify the purchase agreement signed with the builder and to file the rebate application within two years of closing. Failure to file on a timely basis can mean that you lose the ability to claim the rebate. The buyer will also need to make sure that the property has been rented out to an arms-length tenant for at least the initial 12 months. Your trusted Real Estate Lawyer and Accountant should be able to assist you with this.
Understanding HST rebates is essential for navigating the complex landscape of new home purchases in Ontario. Whether you're eyeing your first home or an investment, these insights can potentially avoid any last-minute surprises and save you thousands of dollars.
Feel free to bookmark this page for future reference or reach out if you have any questions. Your journey to homeownership should be as smooth and rewarding as possible.
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