Wednesday, August 11, 2010

The Harmonized Sales Tax’s Effect on Real Estate

On July 1st, the Ontario government implemented the HST as part of a tax plan designed to strengthen the economy. While lots of discussion surrounds the changes – let’s cut to the chase. Here’s what people buying or selling a home need to know.

About 93 per cent of all homes sold in Ontario are not subject to an additional tax amount under the HST.

It’s important to note, the HST is not charged on resale homes.

In addition it is not charged on:

  • home insurance
  • mortgage interest costs

HST is charged on:

  • real estate commissions
  • legal fees
  • new homes

(The full list of what changes and what doesn’t change is available on the website (23 languages), PDF format and for free download as a mobile application. )

New Homes Rebate

Regardless of the price of new homes purchased as primary residences,, buyers may be entitled to a rebate in respect of the provincial part of the HST of up to $24,000, ensuring that buyers of new homes priced up to $400,000 will, on average, pay no more – or possibly even less – tax than under the PST system. The effect of the rebate is that homes valued over $400,000 will be subject to the 8 per cent provincial part of the HST on the amount above $400,000.

New Rental Housing Rebate

New rental housing, including residential investment properties, receive a similar rebate to the new homes reimbursement. This rebate also supports affordable rental housing in Ontario.

Other Tax Credits and Incentives

And to leave your readers with some context of how real estate agents are viewing the market, check out http://www.torontosun.com/newhomesandcondos/2010/08/06/14946611.html

I have also provided some additional resources below and if you or any of readers have any questions, just ask

Rachael.MOR@ontario.ca

Some Helpful Links:

Ontario HST Website

Canada Revenue Agency

Helping Homebuyers and the Housing Industry with an Enhanced New Housing Rebate and a New Rental Housing Rebate

Frequently Asked Questions

Builder Disclosure Requirements

Builders of New Housing

New Housing Rebate

Owner-built Homes, Mobile Homes and Floating Homes in Ontario

Purchasers of New Housing in Ontario

Stated Price Net of GST/HST New Housing Rebates

Property Tax Credit

2 comments:

grahame said...

Hi, my name is Grahame with the Ontario Ministry of Revenue. I read your post and wanted to add the following comments.

The number one thing that can be done to ensure that people can afford a home is to ensure that people have a job. The HST is estimated to increase investment by $47 million and almost $600,000 jobs.

The HST will not apply to homes under $400,000 and will not apply to resale homes regardless of the price.

The HST is part of this comprehensive tax package that will see 93 per cent of Ontarians receive personal income tax cut. With these cuts Ontario now has the lowest provincial tax rate in Canada on the first $37,106 of taxable income. In fact, 90,000 low-income Ontarians will no longer have to pay Personal Income Tax.

To help families we have introduced a permanent $260 Sales Tax Credit for low- and middle-income adults, children and seniors. In total $4.2 billion in transition payments will be delivered to help Ontarians adjust to the Harmonized Sales Tax. It is important to remember that every $100 in tax relief is equivalent to the 8% tax on $1250 in newly taxed items.

shopTOism said...

Additional Links Provided by Grahame;

I read you blog post regarding the Harmonized Sales Tax and just wanted to share a couple links with you.

Please find more information for people buying homes here: http://www.rev.gov.on.ca/en/taxchange/homebuyers.html

Another helpful document is a list of what's taxable under the HST and what's not: http://www.rev.gov.on.ca/en/taxchange/pdf/taxable.pdf.

For more information about the HST please visit www.ontario.ca/taxchange.

Please do not hesitate to contact me if you have any questions regarding the HST or the government’s tax reforms.

Thank you,
Grahame

Grahame.mor@ontario.ca

www.twitter.ca/riversgr