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Looming HST…what it means for you
It’s coming, whether we like it or not. Starting July 1st, 2010, the HST (Harmonized Sales Tax) will take place, and services and goods which we used to pay only 5% GST on will now be subject to a 12% HST. So what does this mean? Which goods and services are we talking about? Any exemptions? Rebates? If you’re a buyer who will likely be making a purchase after July 1st, read up, it’ll do you well to be informed.
At this point those of us who have been paying attention to the new HST regulations would know that it is only new homes to which the HST will apply. I repeat, resale homes are NOT subject to the HST. However, there is a rebate of up to $26,250 available for new home purchases. See below for the eligible purchases:
- New homes with land
- New homes with leased land
- New mobile homes or float homes
- New home purchased through shares in housing co-op
- Homes newly constructed, or substantially renovated (90% or more) by owner/builder.
For these purchases, a rebate of 71.43%, or 7% of the 12%, of HST paid on the purchase is available up to a maximum amount of $26,250. NOTE: THESE ONLY APPLY TO PRIMARY RESIDENCES. If this is a vacation property or second home the eligibility does not apply.
The two key dates for presales are 11/18/2009 and 7/1/2010.
- If your agreement was signed before 11/18, and if you take possession either before or after 7/1, you will not be required to pay the HST. You also won’t be eligible for the HST rebate. You may, however, be eligible for the GST rebate offered.
- If your agreement was signed after 11/18, and if you take possession after 7/1, you are required to pay the HST. You may also be eligible for the HST rebate.
- If you have purchased your primary home or duplex together with leased land from a builder, you may be eligible for a rebate of up to $26,250.
- If you have purchased from an individual that is not a builder, who has never used it for business purposes, you are exempt from the HST.
- If you have purchased a lot that has been subdivided into 3 or more lots, you are subject to the 5% GST if your possession date is before July 1st, even if the title transfers on or after July 1st. If you take possession on or after July 1st, you are subject to the HST.
This is where things get really complicated…
- If the majority of your construction (that is, again, 90% or more) on or after July 1st, you will be subject to the HST.
- If you newly construct or substantially renovate a residential property to rent it out, you may be eligible for the rebate of 71.43% of the provincial portion of the HST to a maximum of $26,250 per unit priced up to $525,000. If the unit is worth more than $525,000, there will be a flat rebate of $26,250.
(To qualify for this rebate, the first use of the housing would be occupancy/use by renter or by builder as primary residence for a minimum of 1 year)
–> Eligible units:
- Detached, attached or condo with or without legal secondary suite
- Mobile or float home
- Units in a multi-unit building (this includes long-term care residential facilities)
- Land component of a single-unit or multi-unit building where the land is leased or is a co-op.
New Rental Apartment Buildings
- If you’ve bought a new rental building and have rented out all of the units, you would be eligible for a rebate of up to $26,250 per unit.
- If you’ve renovated or built a rental property, you must self-assess the value and pay the GST before July 1st, and HST on or after July 1st.
Rental of Land
Rebates are also available for landlords who make an exempt rental of land for residential use (ex. rent out a residential lot, or site in a mobile home park).
- You must self-assess the land and pay HST under the self-supply or change-in-use rules. Rebate is 71.43% of the provincial component of the HST paid up to a maximum of $8,663 (33% x 26,250) for each lot/site.
As a general rule of thumb, if you pay GST now, the HST will apply.
- Maintenance costs, including electricity, TV and other services provided to tenants.
- You will not be able to claim input tax credits
- You will not be allowed to recover the HST from tenants; owning residential rentals is an exempt activity and landlords cannot register for GST/HST.
- If you rent one…yep, HST applies.
How the HST will affect the buying/renovating process
- Applies to home renovations
- Appliances, insulation, windows and doors
- Residential utility costs, such as hydro, cable, telephone, electricity…but EXCLUDING natural gas.
- Closing costs including appraisals and inspections
- Moving costs
- REALTOR fees or commissions
Questions? Get in touch. firstname.lastname@example.org