Many people want to know how the Harmonized Sales Tax will affect the purchase of a home. Here is the breakdown of the rules involved:
The HST takes affect July1, 2010.
The total tax you will pay will be 13%.
If you buy a resale home you will not have to pay the HST, you just pay the purchase price.
If you are buying a new home you will have to pay the HST.
The province is thinking about putting a rebate in place so that new homes across different price ranges would receive a 75 percent rebate. This is only on the provincial portion of the single sales tax and on the first $400,000. For any under this price on average there is no additional tax amount. The fact is that the HST is hitting everywhere. You will have to pay it on legal fees, moving costs, home inspection fees and real estate commissions. The HST will increase the cost of buying or selling all types of property.
Consumers will have to pay more in taxes on more items and housing will be less affordable for both home buyers and those that rent. There will be more legal fees associated with home inspections, mortgage insurance premiums and real estate commissions. In the province of Ontario for example there will be an additional cost of over $2,000 for most real estate transactions. The current owners in urban areas will also be affected as condo fees will rise between 5-7% as management fees, concierge services and utilities will be taxed. Renters will be hit hard as landlords pass on the higher costs being electricity, gas, cable, maintenance, property management and more.
It is estimated that rents will jump 2.5% to 3.0% because of the HST. It is really an additional tax on home ownership. Realtor commissions, appraisals and other services will be subject to a 12% HST which replaces the 5% GST. New homes will have to pay the full HST. The HST generally applies to a service and the extent is delivered on or before July1, 2010. The HST generally does not apply to the supply of service if all or more then 90% of the service is done before July 2010. There is one train of thought that the HST will actually help real estate. There could in fact be a boom to get transactions done before July 1st, 2010.
This could be even stronger among new home sales where the tax gets paid on the purchase price. Combine that with the usual upswing in sales figures and the HST boom could be the thing that sets real estate up for a good run. However, the additional costs of owning a home which comes from the HST may keep buyers from purchasing and further delaying the real estate recovery process. We can all see the negative effects the HST will have on real estate. However, we won’t know the full effects of the latest tax grab until it is in full swing.
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