When purchasing a new home in Ontario, it's important to understand the various costs involved, including the Harmonized Sales Tax (HST). The HST is a combination of the federal Goods and Services Tax (GST) and the Ontario Provincial Sales Tax (PST). In this blog post, we will explore how the HST is calculated on new homes in Ontario, providing you with a clear understanding of what to expect when budgeting for your new home purchase.
HST Rates:
In Ontario, the current HST rate is 13 percent. This rate includes the 5 percent federal GST and the 8 percent provincial portion. It's crucial to keep in mind that the HST is only applicable to newly constructed or substantially renovated homes. Resale homes are exempt from the HST.
Base Price:
The HST is calculated based on the purchase price of the new home. The purchase price generally includes the base price of the property, as well as any additional costs or upgrades that the buyer may opt for. The base price is the starting point for calculating the HST.
Rebates and Thresholds:
To alleviate the impact of the HST on new home buyers, the Ontario government offers rebate programs. These rebates are designed to provide some relief, particularly for first-time homebuyers. Currently, the maximum rebate for a new home is $24,000.
First-time Home Buyers:
First-time homebuyers in Ontario may be eligible for a rebate of up to $4,000 on the provincial portion of the HST. To qualify as a first-time homebuyer, you must meet certain criteria, such as not owning a home anywhere in the world and intending to use the property as your principal residence.
Purchase Price Threshold:
It's essential to note that the HST rebate is subject to a purchase price threshold. If the purchase price of the new home exceeds this threshold, the maximum rebate amount will gradually decrease until it reaches zero. As of the current regulations, the threshold for a full rebate is $368,000.
Calculation Example:
Let's illustrate the calculation of the HST on a new home purchase with an example. Suppose you're buying a new home with a purchase price of $500,000. Here's how the HST calculation would look:
Base price of the home: $500,000
HST rate: 13%
Federal portion (GST): $500,000 * 5% = $25,000
Provincial portion (PST): $500,000 * 8% = $40,000
Total HST payable: $25,000 + $40,000 = $65,000
In this scenario, if you qualify as a first-time homebuyer, you may be eligible for a provincial rebate of up to $4,000. The maximum rebate amount would be deducted from the total HST payable.
Conclusion:
Understanding how the New Homes HST Rebate Ontario is crucial for budgeting and making informed decisions when purchasing a property. By considering the HST rates, rebates, and purchase price thresholds, you can estimate the impact of HST on your new home purchase. It's always recommended to consult with a qualified professional, such as a real estate agent or accountant, to ensure accurate calculations and to explore all available rebate options that may apply to your specific situation.new home hst rebate ontario