Canadians living in B.C. and Ontario woke up on Canada Day to the inevitable reality of the Harmonized Sales Tax (HST). Homebuyers taking out mortgages for new properties now have to factor in HST on purchases over $400,000 in Ontario and $525,000 in B.C.; however, they can still qualify for rebates. If you’re looking for a home with that ‘lived-in’ feel – you’re in luck. The HST does not apply to resale properties, although you will pay more tax on certain real estate transaction fees.
Here’s a brief look at the rebate program in BC and Ontario:
Federal Portion of the HST (5 percent GST)
Regardless of their provinces of residence, Canadian homebuyers must pay GST (Federal portion of the HST) on new home purchases. They can claim up to 36 percent of the GST on the purchase price or cost of building a new house. The claim amount declines on homes above $350,000 and reaches zero on homes priced at $450,000 or more.
According to the Canada Revenue Agency, you cannot claim the new housing rebate if you don’t intend to use the home as your primary place of residence, i.e. you buy it as an investment property.
Ontario HST (8 percent PST / 5 percent GST)
Across all price ranges, homebuyers in Ontario are eligible for a rebate on 75 percent of the provincial portion of the HST on the first $400,000 value of a new home, and pay the full eight percent provincial tax on the amount above $400,000. They can claim up to a combined maximum federal and provincial rebate of $24,000.
British Columbia HST (7 percent PST / 5 percent GST)
The rebate in BC is 71.43 percent of the provincial portion of the HST up to a combined maximum rebate of $26,250. According to the proponents of the tax, buyers of new homes up to a value of $525,000 pay no more provincial sales tax than they did before imposition of the HST.
The most glaring problem with HST in BC and Ontario are the new housing rebate thresholds: $400,000 and $525,000. Anyone who has shopped for a new home in Vancouver or Toronto lately can tell you that these are far from realistic.
It will be interesting to see how the HST will influence home buying behavior and building starts. Will it be a boon for resale homes, or will we see an increase in new home sales in smaller communities and non-HST provinces like Alberta, where taxes are the lowest in the country? In urban centres, will it influence the already noticeable buyer trend toward micro suites and laneway homes?
If you are qualified for a mortgage under $525,000 in BC and $400,000 in Ontario, or want a resale property, you don’t have to worry. But to get more space, you will likely need to look farther out from the downtown cores to stay under the rebate threshold.
The CENTUM mortgage calculator is a great tool to start planning for your next property purchase.
HST Information:
The Canada Revenue Agency New Housing Rebate
Ontario HST
British Columbia HST
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