There is absolutely nothing simple about understanding the new harmonized sales tax (HST) — when it comes to real estate purchases. This is probably the primary reason for much confusion among consumers, real estate agents, mortgage brokers, accountants and legal counsel. The misconceptions are coming at us from all angles. The best way to combat the misnomers is by understanding exactly why the HST was put into place and how it affects our daily lives.
The new HST was put into place to eliminate hidden taxes on consumers passed along from businesses to the public in higher selling prices of goods and services. By harmonizing sales taxes businesses will be able to offer their goods and services for lower prices. The new HST tax DOES NOT apply to the sell or purchase of an existing resale residential property. The new tax does apply to electricity, gasoline, heating fuel, internet access, personal services, hospitality and tobacco.
Home buyers in the market of “do it yourself building projects”, purchasing a new home from a builder, renovating, acquiring rental properties or purchasing commercial property will be affected by the new HST, however, there have been several federal and provincial rebate programs put into place to offset the impact of the new tax.
New home purchases from a builder of 400,000 dollars or less qualify for a 5% provincial rebate that makes it no more expensive to buy a new home today than before July 1st of this year. Some buyers may also qualify for federal rebate programs regardless of qualifying for provincial rebates. The new HST applies to the purchase price, legal fees, notary fees, closing costs, personal services and commissions.
New home purchases from a builder over 400,000 dollars qualify for a rebate maximum of 24,000 dollars. The rebate is the same for a joint purchase; it does not double in value. The new HST will apply to all the same goods and services as a less expensive new home. Many vendors are choosing to pass rebate savings onto the consumer by offering direct rebates to purchasers helping to cover some of the costs.
Consumers can learn more about federal and provincial rebate programs by visiting www.cra.gc.ca/gsthst or by calling 1-800-959-5525. When purchasing real estate of any sort, consider using a licensed real estate agent, mortgage broker and legal counsel, it could potentially save you thousands of dollars.
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