The housing market in Canada has recently experienced extraordinary growth, while most other industries have been affected by the pandemic. More and more people are looking to leverage the historically low mortgage rates by purchasing new residential properties. The result is extended bidding, which shoots up the average home price.
We have also witnessed many people opting to renovate their existing residential properties instead of purchasing new ones. The thought process behind this decision is to improve the place where they spend a significant part of their daily routine. Moreover, lockdown measures and work-from-home orders have compelled people to take good care of their houses.
Did you know you would qualify for GST/HST new housing rebates if you have bought a new build, invested in a new real estate property, or renovated your home? If unaware of this tax rebate, you may ignore the opportunity to get some money back into your pocket.
Do you want to know how to avoid HST on new homes? Well, it’s good that we have compiled everything you may want to know about claiming the rebate.
How Does The HST Rebate Work On A New Home?
Tax season always gets the panic stations running for most people. On the one hand, you are hoping to get some money back, but on the other hand, you are dreading the possibility of paying more taxes to the government.
GST/HST credit can be good news for you. In simple terms, all taxpayers in Canada qualify to receive a percentage of the sales tax they pay on consumer goods and purchases. Property taxpayers from Ontario qualify for this refund.
How to Avoid HST on New Homes- Explained
As the names suggest, the GST part concentrates on the goods and services tax, whereas the HST encompasses the state aspect of harmonized sales tax. The HST applies to all those who have purchased a new house or significantly renovated their present home.
You can claim the refund to pull back some of the harmonized sales tax (HST) you paid previously for the new or renovated house. Ensure that the house is your primary residence or that you meet all the conditions.
It’s necessary to mention that all freshly built houses qualify for the HST rebate. However, instead of the buyer, it’s the builder who can claim it. Additionally, the criteria exclusively apply to the owner’s principal residence. You will have to convert the house into an investment property if it’s non-residential.
Ontario HST Rebate New Home Eligibility
We have compiled a list of all the conditions you must meet to claim an HST rebate for new homes in Ontario.
- You must buy a freshly built or considerably renovated housing property for residential purposes. It must be based on purchased land (or leased land for at least 20 years)
- You have hired a construction professional to build a housing property or significantly renovate the house.
- You have built or renovated your own home for your family to live in
- You have rebuilt a home that was destroyed by fire.
- Invested in shares of a freshly built or extensively redecorated cooperative housing (co-op) project.
- You have made a substantial addition to your home.
- You have transformed a commercial property into a residential place.
You must also ensure that the buying price of the property does not exceed $450,000 if you want to claim the GST/HST rebate. Crossing the $450,000 threshold will only make you eligible to claim the provincial part of the Ontario new-build HST rebate.
Lastly, people with newly constructed or extensively redecorated mobile homes can also qualify for the rebate- only if they consider those properties their primary residence. They should either be builder-constructed or bought from a builder.
What Do You Mean by Substantially Renovated?
You must remove or replace significant parts of the house to fit into the category of substantial renovation. The guidelines don’t mean you must alter the housing structure to meet the 90% test.
If you meet the criteria by redecorating the space completely, you will get back your previously paid Ontario HST rebate for new homes. It is necessary to mention that alteration within the livable areas of the house will be deemed a substantial renovation. You should consider working on the main floor living areas and finished basements and attics. Garages and crawl spaces don’t fall into livable regions.
Furthermore, a considerable addition does not equate to substantial renovation since you must renovate the existing house. However, if you do both in parallel, you will qualify for significant renovation and an addition to the HST rebate.
What Is The Maximum New Housing HST Rebate Possible?
You can claim the HST rebate if your housing property or extensive renovation work is worth below $450,000 after the purchase. You will receive a federal rebate of up to $6,300.
However, if the property value of your house is above $450,000, you will only qualify for the Ontario rebate. You will be entitled to a maximum of $24,000 if you have paid HST on the land purchase. The amount will drop down to $16,000 if you haven’t.
When Can I Apply For The HST Rebate On New Homes?
To claim the refund, you must complete and submit the GST/HST new housing rebate form, available on the government website. You must submit the form within two years of the construction date. The form will require information about you and your home.
You must also provide a copy of your sales contract, your settlement statement, and other documents if necessary.
Ask the builder to apply for the rebate if you bought a freshly constructed housing or extensively renovated housing property from a builder. The CRA (Canada Revenue Agency) will evaluate your application and notify you when they have arrived at a decision. You will receive a cheque if they approve your application for the rebate claim.
Documents for the HST New Housing Rebate Application
The HST new housing rebate application involves extensive paperwork. You must provide all the required documents to initiate the application successfully.
- Documents You Have To Send
The HST new housing rebate application process doesn’t require personal documents. However, you must submit the necessary invoices with your worksheet if the builder did not replace the HST on the invoice. The CRA will also ask for proof of occupancy on your newly built or notably renovated housing property.
- Documents You Have To Keep
Retaining a copy of your HST new housing rebate application forms will benefit you in the long run. Similarly, you should also keep the originals of your invoices. The CRA will require only the original invoices with the co-owner’s or claimant’s names. Those invoices will be crucial as CRA will refuse the photocopies, account statements, or credit card receipts without them.
HST Rebates on New Homes with More Than One Buyer
You or your immediate family must use the newly-built housing property in Ontario as their primary place of residence to qualify for the HST rebate new home program. You must ensure that the ownership remains within the immediate family and does not include extended family, friends, or business associates.
Suppose a scenario develops where anybody from the excludable category has a small ownership percentage of your new home. In that case, you will fail to meet the HST new home rebate criteria. The responsible authorities don’t dispatch an apportioned rebate percentage based on your real estate share. Therefore, either all the owners qualify collectively for the rebate, or no one does.
If you have received an Ontario new housing rebate but one or more from the ownership group are not closely related to you or do not live at the residence, you must contact the CRA immediately.
There’s no certainty that you can evade the possibility of getting caught. If the CRA finds out about your case, they will impose massive interest on the refund amount. To avoid such harassment, you must address the issue immediately rather than increase thousands of extra interest.
HST New Housing Rebates You Can Claim
So far, we have discussed about the HST rebate new home program. In addition, you could explore the idea of claiming a transitional new housing rebate that may be available. In such cases, you will stand on good ground by working with a reliable real estate rebate firm.
However, remember the new HST housing rebate is not accessible to partnerships or corporations.
Houses Purchased from a Builder
The Canadian government introduced the HST’s new housing rebate program. They have set a fixed set of criteria that you must meet to qualify for the rebate.
Other criteria that you must meet to avail of the HST rebate new home are as follows:
- You must purchase a freshly built or extensively renovated real estate property from a home builder or constructor. The properties could range from a residential condominium unit, a duplex, a townhouse, and much more.
- You should buy a recently constructed or noticeably refurbished mobile house from a builder or a vendor.
- You have invested in real estate shares of a newly built or considerably revamped cooperative housing project.
- You have bought a newly built or heavily renovated house for which the land lease will be for at least 20 years.
We have underlined a few additional conditions that you must adhere to:
- You should find two builders if you have the sale and purchase agreement — the initial builder and the first purchaser. Pay the new housing HST rebate to Builder A to buy the newly built house and the assignor for gaining the interest on the same property.
- If you have more than one owner for the property purchase, ensure all individuals meet the HST new housing rebate criteria.
Owner-built Houses
You can qualify for the HST new housing rebate if you build the house yourself instead of buying it from a builder. You must meet one of the following conditions to claim the HST rebate:
- You build the house yourself or hire a contractor to do the job for you.
- You renovate the house yourself or delegate the job to a professional.
- You bring a significant addition to your house.
- You transform a commercial housing space into a residential property.
- You renovate a newly constructed mobile home or hire a professional team.
Ontario Tax Rebate for First-Time Home Buyers
All first-time home buyers must remember that the Canadian Government levies a land transfer tax on purchasing every home in Ontario.
The Ontario land transfer tax:
- 0.5% of the first $55k
- 1.0% of the next $195k
- 1.5% of the next $150k
- 2.0% of the next $1.6 million
- 2.5% of the remaining amount above $2 million.
You will be sitting on a tax credit and receive $1,500 when you pay your taxes on the date of your home purchase. The amount was $750 before 2022.
You should put the Home Buyer’s Expense amount (previously $5,000, now $10,000) on Line 31270. As per the government rule, you can share the amount with a spouse or common-law partner; however, make sure the combined total does not exceed $10,000. The CRA will offer a rebate of $1,500 on the taxes you pay.
How Long Does It Take to Receive the HST Rebate?
You must file the New Housing HST Rebate application with the (CRA) Canada Revenue Agency within two years of purchase or the completion of renovations of the housing property. You will receive your New Housing HST Rebate from the CRA within 60 days.
