HST new housing rebate when buying an investment property
When you purchase a home, you also need to consider that closing costs will add 1.5-4% of your purchase price. A new housing rebate can go a long way in mitigating your costs.It’s very tempting to flip your property with a hot Toronto Market and make a healthy profit. Investment property owners should be aware that in order for you to keep the HST rebate you must have rented out the property for at least a year. This does not mean from occupancy this means from closing. New Home Buyers or Real Estate Investors can receive an HST new housing/rental rebate of up to $30,000
The HST Rebate has been around now since mid 2010 since CRA introduced the HST system in Ontario. The rebate is to discount first time home buyers or investors of real estate on the HST portions of their purchase as long as certain conditions are met.
First let’s talk about the discounting element. There are two important factors GST & Provincial Sales Tax. The GST credit has been around for a long time and hasn’t changed it is 36% of the actual GST portion paid on a new purchase. However there is a restriction on any purchase over 350,000 the GST credit will start dwindling until it reaches 450,000 where it becomes 0. The Provincial portion of the tax is 75% of the actual amount paid capped at 400,000. What this means is that if you buy a property over 400,000 you will still be eligible for 75% of the 8% provincial tax paid.
Let’s look at a couple of examples.
Purchase price of property 350,000 + HST ( GST 17,500 PST 28,000) The credit for such a purchase would be 36% of the 17,500 = 6,300 and 75% of the 28,000 = 21,000 therefore a total of 27,300.
Purchase price of property 450,000 + HST ( GST 22,500 PST 36,000) The credit for such a purchase would be 36% of the 22,500 but since the property value is 450,000 the credit get’s reduced to 0 and 75% of 36,000 which would be 27,000 but since the PST is capped at the PST of a 400,000 the total PST credit would be 24,000.
In Ontario, the minimum you’re going to get back on a million dollar property is $24,000. Typically, you’re going to get back every dime you pay in HST, except of course the fee that you pay to your accountant or a lawyer.
If you buy a property for $400,000 and you pay $27,000 in HST you’re going to get $27,000 in HST back.
Now this credit is available for both first time home buyers and those that are purchasing properties as an investment the only difference is the forms that have to be filled out for these credits. Remember also in a lot of cases where you are purchasing a property from a builder specially condos the builder is already discounting this HST rebate on the purchase price of the condo, be aware that you are signing this credit over to them to get a discounted price on the purchase. Also understand that they can technically do this if your investment is to be your principal residence, if not you should be paying full value for the condo and getting the discount later or else you may face problems 2 years later if CRA audits you and notices that the wrong forms were sent in.
Consult an Expert Accountant or a Lawyer, who has an experience in dealing with HST Refund/ Rental Rebates.
Simply google to find accountants your area offering HST Rebate . Typically you are looking at fee of $500-$700.