The recent Canadian housing market experienced a wild, roller coaster ride but has given way to a more balanced market, welcomed by many buyers and sellers. With inventories of existing homes decreasing, are you considering purchasing new? Let's continue sharing some tips on how the GST and HST could impact your buying decision.
News & Views
The introduction of the HST in Ontario and BC on July 1, 2010 has had an effect on the housing sector. It not only impacted new home purchase prices, it also affected many other home services, such as realtor commissions, legal fees, title insurance, home inspections etc., regardless if you buy new or existing.
But, as mentioned in our previous issue, the introduction of the HST didn't affect every home purchase in the same way. Existing home purchases are exempt from the HST; so there was no impact in this area of the housing sector. However, new home purchase prices were impacted differently, depending on the applicable HST rebate a new home purchaser could eventually claim.
In our last issue, we outlined the impact the introduction of the HST has had on new home prices. All new homes purchased in Canada are subject to GST and have been for years. This will continue in all provinces where there is no HST. As part of its 2009 budget, the federal government introduced the GST/HST rebate for new home purchases to help stimulate new home construction during the recession. The rebate, equal to a maximum of $6,300, reduces the GST portion (or what is the federal portion of the HST) from 5% to nearly 3.5% for homes purchased under $350,000. The rebate also applies (to a lesser degree) to new home purchases between $350,000 and $450,000.
But most importantly, home buyers who are purchasing a newly constructed home in a province where the HST applies could be entitled to partially claim the provincial portion of the HST. In Ontario, the HST rebate is equal to the Purchase Price x 8% x 75% to a maximum of $24,000. In BC, the HST Rebate is equal to 5% of the new home purchase price up to a maximum of $20,000. To obtain the provincial portion of the HST rebate, complete the appropriate section of form GST190 of your Federal Tax Return. For more information about the rebate and eligibility criteria, go to http://www.servicecanada.gc.ca/eng/goc/gst_new_housing.shtml. And since July 1, 2010, first time home buyers in Nova Scotia who close the purchase of a new home can complete the "First-Time Home Buyer Rebate Application" and submit it to Service Nova Scotia and Municipal Relations to claim up to a maximum of $1,500 of the provincial portion of the HST applied to purchase price. Each province has its own variations on the HST tax credit.
Additional relief is available to first time buyers. A number of tax credits or tax refunds apply depending on where you purchase your home. For example, the Home Buyers Tax Credit (HBTC) is a federal tax credit that reduces the amount of federal income tax owing by a maximum of $750. Complete line 369 of your Federal Tax Return to claim the HBTC.
In addition, depending on your home province, additional refunds could be available. Qualifying first time home buyers in Ontario and BC could be entitled to a refund of all or a portion of the Land Transfer Tax they paid at time of closing. In Ontario the maximum refund of $2,000 must be claimed by completing the form "Ontario Land Transfer Tax Refund Affidavit For First-Time Purchasers of Eligible Homes" and submit it to your local Land Registry Office. In BC, how much of a refund you could receive will depend on the value and size of the property. To claim, complete the form "First Time Home Buyers' Property Transfer Tax Return" and submit it to your local Land Registry Office. Your lawyer can also do this for you when completing all required documents at time of closing.
Tips
Did you know that having an energy efficient home could earn you money? Wouldn't we all love to have some extra money in our pocket – especially around the holidays? We showed you how to find HST/GST rebates in your province, now we're going to outline how making the choice to be more energy efficient could really pay off.
Nationwide, the provincial government is offering various incentives to make your home environmentally friendly. If you've got an outdated furnace, refrigerator or other energy guzzling appliance, then this might be just the motivation you need to upgrade.
The provincial government has introduced energy savings programs to reward environmental consciousness. If you make energy efficient improvements to your home you could be eligible for rebates. That should give you a boost! Energize your savings, instead of your appliances. Make the environmentally healthy choice, and switch to an ENERGY STAR appliance, the rewards are well worth it.
Even energy efficient home renovations could qualify for the government rebates. So, you can update your windows and doors too! For a list of renovations and upgrades that apply - and for rebate guidelines for your province, visit the Office of Energy Efficiency section of the Natural Resources Canada web site for more information.
