Some services in Ontario are subject to the new HST (Harmonized Sales Tax) effective May 1st. HST will be fully phased in starting July 1st, 2010. The changes discussed in this post will take effect on July 1st, 2010.

The HST tax will combine the current PST of 8% percent with GST of 5% percent, to create a new Harmonized Sales Tax that totals 13%. This new tax will effect several real estate and related services which previously would have only had GST or PST applicable.

The biggest misunderstanding I encounter on a day-to-day basis involves the purchase and sale of a home. Resales homes will NOT be subject to the new HST, but new home construction over $400k will be subject to 13% HST. There are however services related to your real estate transaction in which HST will apply.

For Sellers:

  • Realtor Fees will now be subject to 13% HST versus the current 5% GST that applies.
  • Legal Fees associated with the closing of your home will be taxed HST.
  • If you own a condo, and order a Status Certificate – it will be subject to HST (Condominium Status Certificates usually costs about $100-150 to order – a small expense but worth mentioning)

For Buyers, HST will apply to:

  • Home Inspections
  • CMHC Premiums for high-ratio mortgages (CMHC charges an insurance premium on “high-ratio” mortgages. That is, mortgages in which less than 20% is given for a downpayment. CMHC charges 2.75% on a $300k+ home with a 5% downpayment)

Other Related Real Estate Expenses that will be subject to 13% HST after July 1st:

  • Movers
  • Home Renovations
  • Heat and Hydro costs

I hope this clears up some of the confusion surrounding HST. Please feel free to contact me if you have any further questions regarding these new changes.

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