Is an Investment
Property Eligible for an HST Rebate?
The introduction of Harmonized Sales Tax on new build
properties in July 2010 was not meant to put a strain on investors. The
Canadian Government put a couple of rebates in place to help buyers of new
residential properties handle the financial burden of the increased HST. For
owner-occupied residences, the builder will incur the HST rebate, while the investor
will be able to buy the property at a value of the purchase price. However, for an investment property, the HST
rebate can get a little trickier. Since the newly built residence will not be
owner-occupied, the investor will be responsible to cover a component of HST
calculated based on the purchase price of the property prior to closing the
sale. However, when dealing with newly built investment properties, the purchaser
can apply for the HST New Housing Rebate up to 2 years after final closing and
title transfer. This means that investors will be asked to cough up tens of
thousands of dollars in order to close the deal, putting a serious additional
financial burden on the investor.
What Exactly Is the
New Housing Rebate?
The HST New Housing Rebate allows buyers of newly
constructed properties to recover a portion of the taxes paid to secure the
purchase of the property and transference of ownership. Now, the breakdown can
be a little confusing, as the amounts change depending on the purchase price of
The New Housing Rebate offers individuals who purchase a
newly constructed property the opportunity to recover both a percentage of the
federal portion and a percentage of the provincial portion of the Harmonized
Sales Tax. In Ontario, the HST is 13%, breaking down into a 5% and 8% split
between the federal and provincial government.
There are some exceptions in regards to recovering your
If the base price of the property is greater than or equal
to $450,000, the federal portion of the New Housing Rebate will be unavailable
The provincial portion of the New Housing Rebate is
available for up to $400,000 of the purchase price of a property. This limits
the provincial portion of the New Housing Rebate to a maximum of $24,000
($400,000 x 75% x 8%) for a 400,000+ purchase price. The amount due on closing can exceed this
maximum value, which is why it is always important to consult a professional
about your HST tax rebate.
Furthermore, the HST New Housing Rebate is only available to
individuals seeking to acquire property for investment purposes. It is
available to individuals who meet all of the conditions for claiming the rebate.
Perhaps the most important thing is that individuals who are
interested in or have purchased a newly built investment property are made
aware of the HST rebate, the increased financial burden that the tax imposes at
the time of final closing and the ways investors can get the additional cash
necessary to close the deal. Since banks
do not lend money specifically for HST, investors have had to turn to
independent companies that help lend, file and claim your HST Rebate.