How Will the HST Impact You?
As you're probably aware July 1st of this year is the date that Ontario's new "harmonized sales tax" comes into effect. This new "blended" tax combines the 8% Provincial Sales Tax with the Federal Government's GST of 5%. The new "harmonized" 13% tax will increase the cost of many real estate transactions that were, up until now, subject only to one or the other of the two separate taxes.
So what does this mean for people looking to buy or sell their home?
New Home Construction: Will be subject to the full 13% tax.
Resale Homes: Good news here! Existing homes that are being resold are not subject to the new tax so the single largest dollar amount exchanged is not taxable under HST.
A number of services that are associated with the sale of an existing home are, however taxable under the new scheme. This could include legal fees, home inspection fees, the cost to actually move in or out of the home, title insurance and real estate commissions - to name a few. At the present time these are PST exempt and subject to the 5% GST only.
If you are SELLING your home: As of July 1, 2010 you will be required to pay 13% tax on real estate commissions, legal fees and even the Condominium Status Certificate fee which cannot exceed $100 (thanks to the Condominium Act!) will be inclusive of HST.
If you are BUYING a home: As of July 1, 2010 your home inspection, the cost of a moving company and the cost of the CMHC premium for "higher-ratio" mortgages will all be subject to the combined 13% tax.
The Ontario Real Estate Association estimates, for example, that the 13% "harmonized" tax - in the case of a resale home valued at $360,000 - will increase closing costs by approximately $2,000. This does not include the provincial and municipal land transfer taxes already in place.
So if you are thinking of buying or selling a home in any of Toronto's most sought after neighbourhoods - Leaside, Leslieville, Riverdale, The Beaches, Moore Park or East York - you may want to consider taking action before July 1st of this year...
