To continue where we left off in the first part, let us look further into how HST rebate works.
HST Rebate Eligibility
Investors are also eligible for HST rebate. They must apply to the CRA under the New Residential Rental Rebate to receive the rebate. Now there are some conditions to fulfill before putting an application to the CRA. You must have a lease agreement for at least 1 year and the condo or house must be leased to a tenant for at least 12 months after closing. Also, unlike the end user, an investor must pay the entire HST upfront at closing. CRA will send the rebate cheque a couple of months after the application is received.
Here is an important point to remember. If the property is flipped in the 1st year, the investor will not get the rebate or if you received the rebate you will have to pay it back in full.
Application Time Limit
Is there any time limit to apply for HST rebate? Yes, there is. You can apply for the rebate up to a maximum of 2 years after the closing date. After 2 years, you are not eligible to apply.
How much is the HST and HST Rebate? HST in Ontario is 13%. 5% GST and 8% PST. Rebate amount varies according to the home price. In Ontario, maximum amount available for provincial portion of HST is $24,000. For 5% federal portion of HST, maximum rebate available is $6,300 up to a pre-tax value of $350,000. After $350,000 to $450,000 this rebate for federal portion is gradually taken away and no rebate is allowed for properties over $450,000.
Here is an example of how this works. Let’s assume an end user and an investor both buy a condo priced at $600,000 in the same pre-construction launch. Both pay same deposit amount. On the closing date after a few years, the end user will pay only the closing costs. The investor on the other hand, will have to pay the rebate portion of the HST which equals to the maximum of $24,000 on 600,000 dollars.
This information is presented for general information and not to be taken as professional advice.
Always consult with your tax accountant or a lawyer to find out how HST and HST rebate applies to you.
If you are looking to buy a pre-construction condo and need help with it, feel free to contact me at 647-834-9928 or send an email to email@example.com