The HST tax will effectively combine the Provincial Sales Tax of 8% percent along with the Federal GST Tax associated with 5% percent, to produce a new “harmonized” total overtax of 13% percent. This new tax will be applicable to many real estate services which hitherto just had one or the other tax applied.
The HST will result in a 13% tax on new home construction, but my post now will concern those ancillary costs pertaining to the buying and selling of resale residential real estate properties in Ontario…
Primary, the good news …. there is no HST tax payable over the sale of a reselling home (residential). So the single largest dollar amount exchanged is not really taxable under HST.
However, under the harmonized gross sales tax (HST), home buyers and sellers will have to pay extra tax on several services associated with the real estate transaction: services which include legal fees, moving costs, real estate commissions together with home inspection fees. Currently, consumers only pay your 5% Goods and Services Tax (GST) with these services.
In short, after July 1, 2010, if you’re a seller , you will have a 13% percent tax payable on the real estate commission you pay – currently there’s only the 5% percent GST payable about this fee. Your lawyer’s fee as well be subject to the 13% percent HST. One bit of good news – the cost of a Condominium Status Certificate will the same; while you will have HST at 13% instead of GST at 5%, there should not be an increase in your legislated maximum total number of $100.
If you’re a buyer , any Home Inspection you find the money for will be subject to your 13% percent HST. And so will the money necessary movers hired. In add-on, the cost of this CMHC premium for “high-ratio” mortgages has traditionally been taxable for PST – this level will now be taxable for any full 13% percent HST.
So one can see that, with the introduction of the HST, whether you are buying or selling a Resale Home with Ontario, costs will be becoming greater.
A press release from the Ontario Real-estate Association earlier this year summarized some of these changes which will take place – the example they used was for a resale house priced at $360, 000, and it was eventually determined that the HST might add over two multitude of dollars in new income taxes to closing costs. Take note, these taxes are besides the Land Transfer Taxes which exist for both the Province and the Town of Toronto. OREA calculated that, in total, the HST would add $313 thousand thousand annually in new fees to resale home transactions.
CURRENT INCOME TAXES PAID, VERSUS THE BRAND-NEW COMBINED HST TAX PAYABLE, FOR A HYPOTHETICAL $360, 000 REAL ESTATE TRANSACTION:
Up-to-date Tax | New Duty | Total HST Payable
Mortgage Insurance Premiums(1) $752. forty | $470. 25(2) | $1222. 65
Legitimate Costs $50. 00 | $80. 00 | $130. 00
The property market Commission(3) $900. 00 | $1, 440. 00 | $2, 340. 00
Property Inpection $20. 00 | $32. 00 | $52. 00
Identify Insurance $24. 00 | $15. 00 | $39. 00
Entire New Tax: $2, 037. twenty-five
(1) CMHC quality of 2. 75% for mortgage with a 5% down payment for a $300, 000+ home.