Prospective homebuyers contemplating the acquisition of a new or pre-construction property often find themselves grappling with uncertainties regarding the HST rebate.
Queries such as "Who bears the HST cost for a new home?" and "How is the HST rebate computed?" frequently occupy their thoughts, and with good reason.
The HST rebate can constitute a substantial amount, potentially making a difference of over $30,000 to your financial bottom line.
It is important to note that the guidance provided herein is a starting point for new homebuyers, and it is imperative to seek advice from your legal counsel and accountant regarding the HST rebate.
Who Qualifies for the HST Rebate?
The eligibility for the HST rebate extends beyond condo seekers purchasing pre-construction units; it also includes homeowners undergoing significant renovations and those building new homes. The following categories of individuals may qualify for the HST rebate in Ontario:
1. End users and investors purchasing pre-construction condos or houses.
2. Homebuyers acquiring newly constructed residences that have never been occupied.
3. Homeowners undertaking substantial renovations impacting the entire dwelling.
4. Individuals who have constructed a new home themselves.
HST Rebate: End User vs. Investor
Understanding the application process for the HST rebate is crucial and depends on whether you intend to reside in the new home or if you are an investor planning to lease the property immediately after closing.
For those planning to occupy the property, applying for the New Home Rebate (NHR) is essential. The rebate is based on the premise that you, or a direct blood relative, will be the principal resident for at least the first year. The HST rebate is often factored into the purchase price for pre-construction properties in the Greater Toronto Area (GTA). However, if the property is sold within the initial one-year period, the Canada Revenue Agency (CRA) may require repayment of the HST rebate.
- The new homebuyer (or a direct blood relative) must reside in the new home as the principal residence for the first 12 months.
- If the property is sold within the first year, the HST rebate must be repaid in full.
- Only direct blood relatives, as defined by the CRA, can occupy the new property.
- Co-signers must also live in the new home for the rebate to be valid.
It is crucial to complete all necessary steps to claim the new home as your principal residence, including updating your driver's license address. The application for the HST rebate can be made within two years after closing.
Both Canadian and foreign investors can qualify for the HST rebate on a new home, but the application process differs. Investors must apply under the New Residential Rental Property Rebate (NRRPR) instead of the NHR. To be eligible, investors must provide a one-year lease agreement, demonstrating that the new home will be rented for at least the first 12 months after closing. Unlike the NHR, investors applying for an NRRPR must pay the entire HST upfront and receive the rebate after submitting proof of the lease agreement.
- Investors must provide a one-year lease agreement and rent the new home for at least the first 12 months.
- If the property is sold within the first year, the HST must be paid in full.
- Investors applying under NRRPR must pay the HST in full at the time of purchase.
HST Rebate Amount
The Harmonized Sales Tax (HST) in Ontario comprises 13% of a new home's purchase price, including 5% GST and 8% PST. The rebate program enables new homebuyers to recoup a substantial portion of the HST. The rebate amount varies based on the price of the new home:
- For homes or condos under $350,000, a maximum rebate of $30,000 is possible (36% on GST and 75% on PST).
- Homes or condos priced between $350,000 and $450,000 follow a sliding scale.
- Properties exceeding $450,000 can receive a maximum rebate of $24,000.
*This post is intended for informational purposes only. Consult with your lawyer for specific details about the HST rebate.*