How HST applies to the purchase of a new home or condominium from a builder in Ontario

If you are planning to buy a new construction home or condominium from a builder in Ontario, you may be wondering how the Harmonized Sales Tax (HST) applies to your purchase. HST is a 13% tax that combines the 5% federal Goods and Services Tax (GST) and the 8% provincial Ontario Sales Tax (PST). HST is charged on most goods and services in Ontario, including new homes and condominiums.

However, you may be eligible for a rebate of some or all of the HST you pay, depending on the type, price, and intended use of your new home or condominium. In this blog post, we will explain how HST works for new construction homes and condominiums in Ontario, and how you can claim the rebates available to you.

HST on new construction homes and condominiums in Ontario

When you buy a new construction home or condominium from a builder in Ontario, you have to pay HST on the purchase price. The purchase price includes the base price of the home or condominium, plus any upgrades, extras, or adjustments made by the builder. The purchase price does not include the land transfer tax, legal fees, or other closing costs.

The amount of HST you pay depends on the purchase price of your new home or condominium. The higher the purchase price, the more HST you pay. For example, if you buy a new home or condominium for $500,000, you have to pay $65,000 in HST ($500,000 x 13%).

Who pays the HST will depend on your agreement of purchase and sale. In most cases, the purchase price in the agreement of purchase and sale is inclusive of HST, meaning the builder has already accounted for the remittance of the HST in the total purchase price. It is important to read your agreement of purchase and sale carefully to confirm whether HST has been included in your purchase price, and whether that accounts for any rebates also being assigned to the builder.

You may be eligible for a rebate of some or all of the HST you pay, depending on the type, price, and intended use of your new home or condominium. There are two types of rebates you can claim: the federal rebate and the provincial rebate.

The federal rebate

The federal rebate is a rebate of 36% of the federal portion of the HST (5%) for new homes and condominiums that cost $350,000 or less. The federal rebate is reduced by 4% for every $1,000 of the purchase price over $350,000, and is eliminated for new homes and condominiums that cost $450,000 or more. The maximum amount of the federal rebate is $6,300.

For example, if you buy a new home or condominium for $400,000, you can claim a federal rebate of $4,560 (36% x 5% x $400,000 - 4% x 5% x ($400,000 - $350,000)).

The provincial rebate

The provincial rebate is a rebate of 75% of the provincial portion of the HST (8%) for new homes and condominiums that cost $400,000 or less. The provincial rebate is not reduced for new homes and condominiums that cost more than $400,000, but is capped at $24,000. The maximum amount of the provincial rebate is $24,000.

For example, if you buy a new home or condominium for $500,000, you can claim a provincial rebate of $24,000 (75% x 8% x $400,000).

How to claim the rebates

The rebates are available to individuals who buy a new construction home or condominium from a builder in Ontario for use as their primary place of residence, or for use as the primary place of residence of a close relative. A close relative includes a spouse, common-law partner, child, grandchild, parent, grandparent, brother, or sister.

A different form of rebate is available to individuals who buy a new construction home or condominium from a builder in Ontario for use as a rental property, once that property has been rented.

There are two ways to claim the rebates: through the builder or through the Canada Revenue Agency (CRA).

Through the builder

The most common way to claim the rebates is through the builder. In this case, the builder will charge you the net purchase price, which is the purchase price minus the rebates. The builder will then apply for the rebates on your behalf and remit the HST to the CRA. This arrangement will be detailed in your agreement of purchase and sale.

For example, if you buy a new home or condominium for $500,000, and you are eligible for a federal rebate of $4,560 and a provincial rebate of $24,000, the builder will charge you $471,440 ($500,000 - $4,560 - $24,000) as the net purchase price. The builder will then apply for the rebates of $28,560 ($4,560 + $24,000) on your behalf and remit the HST of $65,000 to the CRA.

To claim the rebates through the builder, you have to sign an agreement with the builder that states that you are buying the new home or condominium for use as your primary place of residence, or for use as the primary place of residence of a close relative. You will typically also have to provide proof of occupancy, such as a driver's license, a utility bill, or a voter's card, that shows your name and address.

Through the CRA

The other way to claim the rebates is through the CRA. In this case, the builder will charge you the full purchase price, which includes the HST. You will then have to apply for the rebates yourself and receive a refund from the CRA.

For example, if you buy a new home or condominium for $500,000, and you are eligible for a federal rebate of $4,560 and a provincial rebate of $24,000, the builder will charge you $500,000 as the full purchase price. You will then have to apply for the rebates of $28,560 ($4,560 + $24,000) yourself and receive a refund from the CRA.

Conclusion

Buying a new construction home or condominium from a builder in Ontario can be an exciting and rewarding experience, but it also involves paying HST on the purchase price. However, you may be eligible for a rebate of some or all of the HST you pay, depending on the type, price, and intended use of your new home or condominium. You can claim the rebates through the builder or through the CRA, depending on your specific circumstances. To ensure that you pay the correct amount of HST and claim the rebates you are entitled to, you should consult with a qualified lawyer and accountant before signing any agreement or making any payment.