An Overview of the GST/HST New Housing Rebate

Taxpayers who purchase a new home may qualify for a partial rebate of the GST/HST paid on the purchase.

The GST/HST New Housing Rebate allows purchasers to partially recover the federal and provincial portion of the sales tax that is paid on the purchase price of a new or substantially renovated home that was purchased with the intention to make it the primary place of residence by the purchaser or a qualifying relation. Typically, the New Housing Rebate is claimed by the builder of a new home on the purchaser’s behalf and adjusted in the final purchase price of the property. In some instances, purchasers may file for the rebate independently.

Similar to the New Housing Rebate, taxpayers purchasing a new condo or home to earn rental income may recover the GST/HST paid on the purchase through the GST/HST New Residential Rental Property Rebate, which offers partial recovery of federal and provincial sales tax on new residential rental properties.

Rebate Amounts

New homebuyers in Ontario are charged 13% HST on their purchase, consisting of a 5% federal tax and 8% provincial tax. The New Housing Rebate essentially refunds 36% of the federal portion of the HST (up to a maximum of $6,300) and 75% of the Ontario portion of the HST (up to $24,000). Similar rebate amounts are available under the New Residential Rental Property Rebate.

Eligibility

You may be eligible for these tax rebates if you’ve done any of the following:

·         Purchased a newly constructed home

·         Purchased a new condo

·         Built a house

·         Contracted someone to build a house

·         Substantially renovated a house or condominium

·         Contracted someone to extensively renovate a home or condo

·         Added a major addition to a home

·         Rebuilt a home that was destroyed by fire

·         Bought shares in a newly constructed cooperative housing project

·         Converted a non-residential property into a home

It is important to note that a key requirement for the New Housing Rebate is that the property must be purchased with the intention that the purchaser (or a qualifying relation) will make it their primary place of residence.

In order to qualify for the New Residential Rental Property Rebate, purchasers must ensure that the property is leased for a minimum of at least one year before disposition. The rebate may have to be repaid if the property is sold within one year after it is first occupied as a place of residence and the purchaser is not buying the unit as a primary place of residence for themselves or a qualifying relation.

Pitfalls and Traps

In recent years, CRA has become increasingly aggressive in auditing New Housing Rebate applications. Quite often, purchasers are reassessed many years after receiving their rebate on the basis that they do not meet the conditions necessary to qualify for the rebate. If they believe that you did not stick to conditions, then penalties can be harsh.

Want to learn more about these rebates and if you qualify? Contact Tax Solutions Canada today by calling 1-888-868-1400.