You’ve probably heard there are two unavoidable things in life. At Options for Homes we can help you figure out how to deal with one of those things: taxes.
In Ontario, the Harmonized Sales Tax, or HST, applies to purchases of everything from chewing gum to luxury cars – and, yes, newly built condominiums and houses.
However, the provincial and federal governments offer some relief to buyers in the form of rebates on a portion of the HST on new homes. If you’re thinking about buying a new condominium from Options for Homes (or another developer) and you intend to live in it, there’s a good chance you qualify for at least one of those rebates.
We’re here to help you understand the basics.
The federal GST/HST rebate on new housing
Let’s deal with this rebate briefly, because it’s only relevant to newly built homes with a market value of up to $450,000 – which, to be honest, only applies to a vanishingly small number of buyers in Greater Toronto these days. (If you expect to pay more than $450,000 and you want to skip the rest of this section, go right ahead. Why get excited over money you can’t claim?)
For the record, the federal government offers a 36% rebate on the federal portion of the HST, which is 5%, on newly built (or substantially renovated) homes that have a fair market value of up to $350,000. The maximum rebate works out to be $6,300 ($350,000 x .05 x .036 = $6,300.)
If the value of the new home is above $350,000 and less than $450,000, that amount reduces along a sliding scale. At $450,000, it slides all the way down to – nothing. The buyer gets zero federal sales dollars rebated when purchasing a home for $450,000 or more.
Given that the average asking price of a new condominium unit in the GTA topped $1.1-million in fall 2022, it’s becoming pretty unlikely that very many new-home buyers in the local market still qualify for the federal HST rebate – if any do at all.
Ontario’s New Housing Rebate
Let’s move along to some good news: No matter how much you pay for a newly built home, you can’t be priced out of receiving the Ontario New Housing Rebate — although there’s a cap of $24,000 on how much you can qualify for.
Here’s how it works: Ontario offers buyers of new homes a 75% rebate on the provincial portion of the HST, which is 8%. You hit the maximum $24,000 rebate at a purchase price of $400,000. ($400,000 x .08 x .75 = $24,000)
After that, the cap kicks in. So whether you pay $400,001 for your new home or $4-million, your provincial new home sales tax rebate always works out to $24,000.
The rebate is only available to buyers who will be using the newly built home as their primary place of residence. And that happens to be the category of buyers that Options for Homes serves.
How we help Options for Homes buyers claim their HST rebates
Because nearly all Options for Homes buyers plan to make their Options home their main residence and will qualify for Ontario’s New Housing Rebate, we make the process easy by applying the full rebate(s) when setting your purchase price.
To understand the difference, here’s how it works if you buy a new condominium unit from a typical for-profit developer: You pay the full HST at closing (since the buyer is responsible for all HST relating to their purchase). Then you apply for a rebate on your tax return for the year of purchase. And then you wait to get your money back.
When you close on a new condo from Options for Homes, however, we only add the amount of HST for which you’ll be liable — we don’t charge you the amount equivalent to the New Housing Rebate that you’re qualified to receive.
Your HST rebate(s) will show up as a credit on your statement of adjustment at closing. So you can think of it like an instant rebate: You won’t get a cheque back from the government, because you didn’t have to pay the rebate amount in the first place.
Now, as is often the case with real estate matters, there are complicated situations, exceptions, and obscure rules that can make your case different from the norm. And no matter how routine or unusual your situation and purchase may be, a competent real estate lawyer’s guidance is essential for understanding and navigating the steps.
Maybe lawyers are the third unavoidable thing in life …