Do You Pay GST When Buying a New Home?
It’s common knowledge that in Canada we pay Goods and Services Tax (GST) on virtually everything we buy, from clothing to vehicles to some food items. But when it comes to the largest purchase we can make in our lifetime – our home – it may come into question whether this purchase is taxable.
The simple answer is yes, the purchase of a newly built home is subject to GST. However, the Government of Canada offers a GST rebate program to make homeownership more affordable.
Not all home purchases are subject to GST. If you purchase an existing (resale) home, GST is not applicable. However, if you purchase a brand-new home from a home builder, or a heavily renovated existing home, these purchases are taxable but potentially eligible for a GST rebate.
Through the GST/HST New Housing Rebate Program, your new home purchase is eligible for a savings of 36% of the GST on the home if it is priced under $350,000. For homes priced between $350,000 and $450,000, a partial rebate is offered. A home priced at over $450,000 doesn’t qualify for a GST rebate.
For example, if you purchase a home valued at $320,000, this home is subject to 5% GST less a 36% rebate on the GST.
- $320,000 x 5% = $16,000 GST pre-rebate
- $16,000 x 36% GST rebate = $5,760 rebate value
- $16,000 – $5,760 = $10,240 applicable GST
- Final purchase price after GST: $320,000 + 10,240 GST = $330,240
If you purchase a home with a pre-tax price between $350,000 and $450,000, your rebate percentage scales from 36% to 0%. The closer you are to $450,000, the less rebate percentage is applied. Speak to one of our qualified Area Sales Managers to inquire about the potential rebate on your home purchase.
To qualify for this rebate program, the home in question must be your primary residence, and it may not be co-owned by a partnership, corporation, or any entity that is not an individual.
Do Builders Post Pricing With GST Included?
It’s common practice for new home builders to advertise available homes including the price of the house, lot, and applicable GST. So, the prices advertised by builders are typically the final price of the home. This makes it easier for you to know what you’re paying for the home, and what amount you’ll need to obtain for your mortgage to purchase the home.
There are exceptions, however, such as the advertisement of homes that are yet to be built. In other words, a home you choose to build from scratch will be advertised as a starting price – or a price range – since the upgrades you add or changes you make to the home can affect the final price. These price ranges, however, still include the GST amount but if your final pre-tax price crosses one of the above-noted thresholds, your final price may change by the time you sign your purchase agreement.
Who Can Use The GST Rebate Program?
The GST New Housing Rebate Program is highly beneficial to anyone looking to buy their first home or downsize to a smaller home as the tax savings are significant. This isn’t to say that the program is only available to these types of buyers, though. Anyone who purchases a brand-new home is eligible for this program if their pre-tax purchase price falls within the eligible ranges.
If you’re looking to control your budget and keep your monthly payments as low as possible when purchasing a new home, staying under $350,000 is ideal. You can maximize your savings by taking advantage of the largest tax rebate possible. If possible, combine this with a down payment of 20% or more to avoid mandatory mortgage insurance premiums and your principal amount owing on your new home will put you in a strong financial position.
Even if you’re buying a new home for over $350,000 but under $450,000, you can still save on GST. You’ll be eligible for less than 36%, but any amount is still a savings in the end. This can help if you’re upgrading your smaller home to one that is larger, but don’t need a home that surpasses $450,000 in price.
Who Takes Care Of The Rebate Form?
The GST form is taken care of by the builder as the rebate is already included in the price of your home.
Keeping the GST New Housing Rebate Program in mind when deciding which new home to purchase can help you stay within your budget and control your finances. Contact one of our qualified Area Sales Managers today to discuss the best new home option for your needs.
Photo credits: depositphotos.com
About the Author:
At Sterling Homes, our mission is to provide the opportunity for affordable homeownership without compromise. Over the last 70 years, Sterling Edmonton has quickly become one of Edmonton’s most popular builders. We bring more than seven decades worth of exceptional customer service, superior design and unparalleled craftsmanship to the greater Edmonton area. As a member of the Qualico Group, Sterling Homes focuses on greater Edmonton’s finest family communities, while being able to offer some of the region’s most family friendly prices thanks to volume purchasing power for materials, trades and land. This has not only made Sterling one of Edmonton’s bestselling, move-up builders, but also one of the industry’s most respected home providers. It is through our uncompromising commitment to our customers that we proudly deliver the Sterling Advantage – that’s why each and every home we build includes a 10-year home warranty, a completion guarantee and new home warranty excellence rating. Our Advantage is our pledge that, when you build your dream home with Sterling, we will deliver a timely, well-built home you’re sure to enjoy for years to come.
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