Tony's Question: How much HST will my Mom pay when selling her house?

Markham Boxgrove Homes, Morningside Heights Homes, Scarborough Town Centre Condos Real Estate: http://www.JasJagpal.com

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Just the other day Tony called and had a few questions on HST.  You see his Mom is looking to sell their house and they were terrified at the prospect of having to pay 13% HST on the sale of their house.  I'd be petrified as well.  Imagine paying 13% tax on a house worth $400,000, yeah that is $52,000 big ones!

I assumed with all the talk about HST in the media and having written a few blogs on it that people understood the basic rules but I think it would be a great idea to refresh everyone how the HST affects you when buying or selling real estate.

1.  If you are buying or selling a house that was built and occupied before July 1st, 2010 then you do NOT pay HST when you sell it.  This is called the RESALE market.  In other words, you are reselling a house you previously purchased.  The majority of the real estate transactions come from resale market so most people won't be affected detrimentally by the HST.

2.  If you buy NEW from a builder, be it Condo, Townhouse, Semi, Detached, etc.  you will be paying HST.  Yeah that Sucks!  To make it suck less... the government decided to provide a 75% rebate on the first $400,000 (average price in Toronto).  So instead of paying $52,000 in taxes on a $400,000 new residence you pay $13,000. 

Obviously if the new house is worth $500,000  you will pay $13K on the first $400,000 and another $13K for the next $100,000 for a total of $26K in HST tax.  Most builders will incorporate the HST tax in their selling price to keep advertising simple and consistent and so they do not alarm Buyers who are looking to buy new.  I'm sure many Buyers would walk away from the builders if they were asked to pay an additional $26K plus for HST on the advertised price.

3.  Lastly, HST is charged on all services that occur in a real estate transaction.  So on an average priced home you will pay around $2000 in HST tax.  This covers tax on Realtor commissions, Lawyer Fees, Bank Appraisals, Inspections,  Movers,  Closing adjustments, etc. 

In a NUTSHELL ... HST is definately an added cost to the real estate transaction in Ontario.  For most resale homes you can think of it as a cost of home ownership and a cash grab by the government,  just like the Toronto Land Transfer Tax.  However, if you want the bells and whistles of buying new and living large you won't mind paying for it.

© 2010- Jas Jagpal

Jas Jagpal, Remax Sales Representative, jasjagpal@gmail.com ; 647-272-6629

Markham Boxgrove Homes, Morningside Heights Homes, Scarborough Town Centre Condos, Toronto Real Estate: www.JasJagpal.com

Posted on: www.1stoprealestate.ca : www.LinkToMorningside.com: www.MarkhamBoxgrove.com

 

 

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HST (TAX)- What Sellers Need to Know today!

April 8, 2010 by 1stoprealestate.ca

I just finished writing the blog and my computer froze… I should have known better to write straight in the blog program without saving it.  Anyways… having vented, let me tell you how HST will affect Sellers of Real Estate and in another post I’ll mention the affects on Buyers.

So What is HST? – 13% Tax (Harmonizing of GST (5%) and PST (8%) – hence HST

When does it take affect? – July 1st, 2010

HST will apply on all current services you pay GST on.  So you will pay on Realtor commissions, Lawyer fees, Inspections, Maintenance, Moving Costs, etc.

Transitional Rules:

1.  If you list May 1st and close July 5th.  As long as 90% of the services related to your Real Estate transaction (open houses, getting mortgages, inspections, title search, etc.) occured prior to July 1st… then you won’t have to pay HST just the GST.

2.  If you list May 1st and close Aug 1st.  Since the 90% rule won’t apply you will now pay on a weighted scale.  2 months (2/3) GST and 1 month (1/3) of HST on all your closing cost (commission, lawyer fees, etc.).  All costs incurred prior to July 1st would only have incurred GST.  Movers would have charged entire HST.

How much will you be paying extra?

Lets calculate using an average GTA price of $400,000 for a single family house.

Seller would pay: 
1.  Commission 3.5% – 5% = $1120 to $1600 more
2.  Lawyer ($1000 – $2000) = $80- $160 more
3.  Moving ($1000-$2000)=  $80 – $160 more
4.  Pre-inspection ($300-$500) = up to $40 more

So Sellers are looking at around $2000 added to closing costs.  Nothing too significant that will cause a dent in the Toronto market.  The Toronto Land Transfer Tax was significantly more expensive and had no affect.  I think surrounding municipalities will probably add their own form on Land Transfer Tax in the upcoming 3-5 years.

In my next post I will talk about how GST affects  Buyers.

Jas Jagpal, Remax Real Estate Consultant – 647-272-6629  jasjagpal@rogers.com

Have real estate questions or thinking of investing in Condos, email me and get VIP discounts and 1st choice with new condos.

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