HST and Real Estate
2010/04/06 - Originally published in the Vernon Morning Star
It will take more than one of these articles to explain the details of the anticipated new Harmonized Sales Tax. This week I'll give you the basic information I have received so far on this topic.
Firstly, the HST will not apply to sales of used residential homes. In general, HST on real estate will be applied in the same situations as the GST is applicable currently.
The HST is to take effect July 1, 2010. If you entered into a contract to buy a new home on or before Nov. 18, 2009 and you take ownership or possession after July 1, 2010 you will pay GST, not HST. If you enter into a contract to buy a new home after Nov. 15, 2009 and take over ownership prior to July 1, 2010 you will pay GST, not HST. If you enter into a purchase contract on a new home after Nov. 18, 2009 and take over ownership after July 1, 2010 you will pay the HST and you will probably be eligible for the New Housing Rebate (assuming it is your principle residence).
Why is November 18, 2009 an important date? The answer is that was the day the government announced their HST proposal.
Under the current GST rules, the New Housing Rebate trailed off the zero at a purchase price of $450,000. In the new HST proposal that limit will be raised to $525,000. The total New Housing Rebate on a home bought at $525,000 is eligible for a rebate of $26,250. That is the maximum rebate, and home purchases costing more than $525,000 will still only be able to get the rebate of $26,250. If you buy a home for less than $525,000 the rebate is less. For example, on a purchase price of $450,000 the rebate drops to $23,150. Of course, the gross amount of the tax, being based on the purchase price, would also be less.
The formula is as follows. Buyers of new homes will be eligible for a rebate of 71.43% of the provincial portion (7% of the HST's 12%) of the HST paid on a new home up to a maximum rebate of $26,250. I can see most new home buyers will be well advised to go over the tax calculation with their accountants prior to solidifying their purchase contract.
More information is available at www.fin.gov.bc.ca/rev.htm
Jane Field works with RE/MAX Vernon. Jane has over 30 years experience in the Real Estate business. To suggest topics for future articles or to ask Jane questions, email her or call 503-3755.
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