There are many rules governing real estate investment in Toronto, Ontario. And it’s hard to stay on top of them all – all the time. However, if you’re looking to buy a new house or property in Toronto, Ontario – one of the rules that you should be aware of is the ‘GST/HST New Housing Rebate’.
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Why? Because understanding this rule can help you save a lot of money. In my experience ‘GST/HST housing rebate’ is a topic that is misunderstood by my clients. It sucks the excitement out of their purchase – when it absolutely shouldn’t.
New Housing GST/HST Rebate: Are You An End-User Or Investor?
What Does The GST/HST Rebate Mean For Somebody Buying A New House In Ontario?
Harmonized Sales Tax (HST) was implemented in Ontario in 2010, which raised the tax on new homes to 13% (HST). To help homeowners deal with the growing cost of buying a new home, Canada Revenue Agency (CRA) introduced the HST rebate program to reimburse buyers for a portion of the additional new home tax.
There are two ways buyers can get an HST rebate in Ontario:
HST New Housing Rebate – when you purchase a newly built condominium unit or house or one that’s undergone substantial renovation
New Residential Rental Property Rebate (NRRP Rebate) – when you buy a newly built home or condo with the intent of renting – this is typical for pre-construction investors
Seems simple enough right? Not so much. The way these HST rebates apply in the buying process is different whether you’re an end-user or an investor.
Let’s say two different buyers, one an investor and one an end-user, are each buying a $500,000 pre-construction condo in the same development.
Both have to pay the same deposit structure in the early phases of their pre-construction condo timeline, but as the condo approaches its registration date (3 to 4 years after the initial payments), in addition to the standard fees due at closing the investor has to pay their ‘rebateable’ portion of their HST to a maximum of $24,000 on a $500,000 condo.
The end-user will also have to pay their closing fees — Land Transfer Tax, development charges, and legal fees — but does not need to pay the additional $24,000 in HST.
Confused? Hang in there.
HST Rebate In Ontario For End-Users (Residential Purposes)
The biggest difference is that when an end-user buys a pre-construction condominium unit from a builder, typically the Ontario HST rebate is assigned to the builder directly upon closing, allowing the builder to essentially deduct the cost of the HST from the purchase price. To the end-user living in that pre-construction condo, it simply means that HST is included in the price.
Note: While most New Home Rebates will be applied at the time of purchase, this may not always be the case. Be sure to consult your real estate agent and a lawyer regarding your purchase and the HST rebate application form.
HST Rebate In Ontario For Investors
In an effort to make things slightly more challenging for investors, they must pay the HST ($24,000) upfront at closing and have their lawyer file for a full HST rebate (HST rebate form for rental property), refunded 4 to 6 weeks later provided they have a one year lease in place. There is absolutely no need to plan for your expenses using an HST rebate Ontario calculator as you’ll always get a full refund.
Related: Understanding Closing Costs Before You Buy That Property
New Housing GST/HST Rebate & NRRP Rebate: Eligibility
Who Is Eligible To Apply For A GST/HST Rebate In Ontario?
Whether you purchase an owner-built house or a pre-construction condo developed by builders, you are eligible to apply for New Housing GST/HST Rebate if:
you have purchased a new house built by a developer or engaged professionals to build a new house on land that you own/lease, this includes pre-construction condos
you have purchased or substantially renovated a new mobile home
you have converted a non-residential property to a residential property meant for primary residence
you have substantially renovated or made a major addition to your house (90% of the interior decor of a unit has to be changed for it to have undergone substantial renovation)
you own a percentage of stock in a co-operative housing association (co-op) where the tax has been paid
Who Is Eligible To Apply For A NRRP Rebate In Ontario?
Both – Canadian residents and foreign investors – are eligible to apply for a New Residential Rental Property Rebate (NRRP rebate) provided they:
have a one-year lease in place, along with an agreement to prove that the new condo or home will be rented to a tenant.
rent the property for a minimum period of one year from the property’s closing date, not interim occupancy.
Along with your one-year lease and Agreement of Purchase and Sale, have your lawyer fill out the HST rebate application form to have the rebate issued four to six weeks after closing. Investors are able to apply for their HST rental rebate in Ontario up to two years after closing. If you fail to file for the rebate within those two years after closing, you may no longer be eligible to receive the money-back.
Related: Flipping Pre-Construction Condos in Toronto – What You Need to Know
Who Cannot Apply For Any GST/HST Rebate In Ontario?
Homebuyers who co-own the house with corporations or in a partnership cannot claim any GST/HST rebate
If you buy a new house in Ontario but that’s not your primary residence as you stay in a different country (outside Canada), your purchase will not be eligible for any GST/HST rebate as it will be classified as your second place of residence
In case you’re making major repairs to your unit, you have to make substantial renovations to your existing home to claim any GST/HST rebate – your unit must look ‘newly built’ post renovation and additions
New Housing GST/HST Rebate: Financial Impact
How Much is the HST Rebate in Ontario?
When it comes to calculating the HST rebate in Ontario, as we know, most pre-construction condos will cost at least $450,000. To make things simple for you, just know that any property that costs $450,000 or more will receive a maximum HST new housing rebate of $24,000.
For new homes with a price of $350,000 or less, you are able to receive a maximum HST rebate of $30,000 while for homes between $350,000 and $450,000, there is a sliding scale, refer to the CRA’s reference for HST New Housing Rebate Calculator.
The HST rebate is a refund received by qualified homebuyers on a portion of the purchase amount of their new home. While the exact refund amount may differ, generally speaking, the maximum rebate at the provincial level is $24,000 (max $400,000 x 0.08 x 0.75) while the maximum federal rebate is $6,300 (max $350,000 x 0.05 x 0.36).
As mentioned above, there is no need for an HST rebate Ontario calculator as you’ll receive a full rebate on the amount you paid – which is almost always $24,000!
The federal rebate is equal to 36% of the federal portion of GST/HST, to a maximum of $6,300 and the Ontario provincial rebate is equal to 75% of the Ontario portion of GST/HST, to a maximum of $24,000.
The provincial rebate amount caps and is applicable on the first $400,000. So the maximum new housing rebate amount available in Ontario is 6% of $400,000, which amounts to $24,000. While the purchase price of homes should be less than $450,000 in order to qualify for the Federal rebate, for homes valued above $450,000, homebuyers may still apply for the provincial rebates.
Claiming New Housing GST/HST Rebate: Documentation
Form GST191-WS, Construction Summary Worksheet: Determines GST/GST amount & eligibility
Form GST191, GST/HST New Housing Rebate Application for Owner-Built Houses: To claim your final rebate amount
Form RC7191-ON, GST191 Ontario Rebate Schedule: Special form for houses located in Ontario, helps you calculate your Ontario HST rebate
Houses Purchased From A Builder (Pre-Construction/Resale)
Form RC7190-WS, GST190 Calculation Worksheet: Helps you calculate your GST/HST rebate amount
Form GST190, GST/HST New Housing Rebate Application for Houses Purchased from a Builder: Helps you claim the final rebate amount
Form RC7190-ON, GST190 Ontario Rebate Schedule: Specifically to calculate Ontario GST/HST rebates
This blog post could have been a lot longer than 1000 words. Laws are extremely nuanced, technical subjects that need to be broken down into simple English. That’s what I tried doing. In case you want more information on any of the details mentioned here, you can check out the full report from Canada Revenue Agency.
To conclude: when purchasing a new property, the application of rules concerning the HST and GST housing rebates in Ontario may seem a bit complex. However, all things considered, the HST rebate is a provision that to a large extent is beneficial, whether it is an HST rebate for first-time home buyers in Ontario or investors.
Disclaimer: Pierre Carapetian Group Realty makes no warranty, express or implied, nor assumes any legal liability or responsibility for the accuracy, correctness, completeness or use of the information provided. Be sure to consult your lawyer regarding your HST rebate.