Guide on GST and HST on New Home Purchase in Ontario

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Do I Need to Pay GST Or HST If I Purchase a New Build Home in Ontario?

A Comprehensive Guide

Purchasing a new build home is an exciting venture. Whether it’s the allure of modern designs, the opportunity to personalize your space, or the thrill of being the first to live in the house, new builds have a distinct appeal. However, in Ontario, there's a crucial financial aspect to be aware of: the Goods and Services Tax (GST) and its provincial counterpart, the Harmonized Sales Tax (HST). Here’s a breakdown of what you need to know:

Understanding GST and HST

GST

A federal tax of 5% applied to most goods and services sold in Canada. When you hear about GST in relation to real estate, it's typically concerning new builds or significantly renovated homes.

HST

In Ontario, the provincial sales tax (PST) and the GST were merged into a single value-added sales tax known as the Harmonized Sales Tax (HST). As of my last update in September 2021, the HST in Ontario is 13%, comprising the 5% GST and an 8% provincial component.

New Build Homes and HST

Newly constructed or substantially renovated homes in Ontario are subject to HST. If you're purchasing a new build, the price will generally include HST. However, it's essential to confirm this with the builder or your realtor to avoid any surprises.

HST Rebates

Luckily, the Canada Revenue Agency (CRA) offers rebates that can offset some of the HST costs:

• New Housing Rebate: This rebate is designed for individuals who purchase or build a new house for use as their (or their relation's) primary place of residence. The rebate can also apply if your home undergoes substantial renovations.

• Rental Property Rebate: If you're purchasing or building a property as a rental investment, you might qualify for this rebate. To be eligible, you must have a signed lease for at least a one-year rental agreement with a tenant.

Rebate Eligibility Criteria

• The new home must be your primary residence, or you must have a signed lease for a rental property.

• You need to have all the sales documentation, like agreements of purchase and sale.

• You must apply for the rebate within two years of the closing date.

Things to Keep in Mind

• Rebate Assignment to the Builder: In many cases, the builder will include the HST in the purchase price and then deduct the rebate. This means the builder gets the rebate directly from the CRA. In return, you, as the buyer, assign your rebate rights to the builder. This is common practice, but always confirm the details in your Agreement of Purchase and Sale.

• Substantial Renovations: A significant renovation involves removing a substantial portion of the interior of an existing house, essentially transforming the home. If you undertake such a project, you could be eligible for the New Housing Rebate, even if it's not a "new build."

• Secondary Residences: As of my last update in 2021, only primary residences or rental properties are eligible for HST rebates. Secondary residences or vacation homes don't qualify.

Conclusion

When purchasing a new build home in Ontario, understanding HST and available rebates is vital. It's not only about budgeting correctly but also about capitalizing on potential savings.

If you're in the process of buying a new home, or even just considering it, always consult with a knowledgeable realtor or tax professional. They can provide guidance tailored to your unique situation, ensuring you make informed decisions.

Remember, buying a home is a significant step, and every detail matters. Ensure you're equipped with the right knowledge, and soon, you'll be unlocking the door to a place you ❤️ "love your life" ❤️ in.