With the HST being implemented by the Government across Ontario and British Columbia, this has caused many questions and concerns related to buying and selling your homes. The HST combines the federal Goods and Services Tax of 5% with Provincial Sales Taxes of 8% (Ontario) and 7% (B.C.), for a single tax at the register of 12% and 13%. For homebuyers and sellers, the impact could be significant because HST affect is able to be positive, negative, or more or less neutral. Here are some ways in which the HST is able to affect homebuyers and sellers.
- Very few Canadians have welcomed any newly implemented tax with enthusiasm, but for the most part, the HST has caused less of an impact than people predicted. While neither the Provincial nor Federal Government will admit to the increases in taxes, the Ontario Government has sent out rebate cheques of up to $1,000 since the HST has been put into effect. This has been divided into three installments to offset the effects of the new taxes on families, combined with tax credits and income tax cuts.
- The Government claims that, like the GST, many hidden taxes are embedded in the final price to consumers, and updating the tax collection system will lead to more competitive pricing on locally manufactured goods and therefore an increase in jobs and reduction in wholesale prices. For homebuyers and sellers, it could mean a reduction in the overall prices of some building materials, and other goods manufactured in Ontario and British Columbia.
- Lawyer’s fees, which were only subject to GST before, are now subject to the full HST.
- A significant issue affecting home sellers is that real estate commissions now include HST instead of strictly GST. For example, this means on a $30,000 real estate commission on a $600,000 resale home, there is an extra $2,400 you don’t need to pay.
- Not all fees associated with a house sale will change; resale houses and most banking and mortgage fees will remain tax exempt.In both Ontario and British Columbia, new homes are eligible for rebates of a portion of the provincial part of the new tax, depending on their purchase price.
- In Ontario, new homes with a price of less than $400,000 would be eligible for a rebate of 75%, up to a maximum of $24,000. New homes costing over $400,000 are also eligible, provided the new home will be used as the purchaser’s primary residence.
- For example, if a house transaction occurred before July 1st, but you are set to take possession after that date, your purchase is subject to what’s called a grandfathering clause. In effect, it’s no different from the tax under the GST system, the home is subject to the federal component of the HST (ex. 5%, but not under the provincial portion. These homes aren’t eligible for the tax rebate.
- Once you take possession of your home-whether new or resale-many of the other costs associated with buying and moving into a new home will increase: designers, painters, contractors, moving companies, and many other service providers now charge HST. However, furnishings, paint, lamps, new appliances, and anything else you buy will nearly cost the same--with the exception of goods made in Ontario or British Columbia, since their wholesale (and therefore final) prices may go down with the removal of taxes incurred during their manufacture.
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