Are you considering purchasing a newly built residential rental property, substantially renovating a residential rental property or have already done so? If so, you may be entitled to a GST/HST rebate. The amount of this rebate will depend on the province in which the rental property is situated in.
What is the GST/HST New Residential Rental Property Rebate?
The sale of a used residential rental property is exempt from GST/HST purposes and therefore, GST/HST is not added to the sales price when it is sold. However, the sale of a new residential rental property is taxable for GST/HST purposes and GST/HST must be added to the sales price.
The GST/HST New Residential Rental Property Rebate was created to offset some of the GST/HST charged on new homes to make them more affordable.
There is a federal and provincial component to this rebate. Currently, Ontario is the only province that provides the New Residential Rental Property Rebate on the provincial portion of the HST.
The maximum federal rebate is currently $6,300. This rebate amount is maximized at a residential rental property price amount of $350,000 and is subsequently phased out to $nil for residential rental property prices between $350,000 and $450,000. There is no federal rebate for residential rental property prices greater than $450,000.
The maximum Ontario rebate is currently $24,000. The Ontario rebate is calculated as 75% of the Ontario portion of HST up to a maximum of $24,000 which is reached at a residential rental property price of $400,000. Unlike the federal rebate, there is no phase out of the Ontario program and residential rental property prices greater than $400,000 will still qualify for the maximum rebate of $24,000.
GST/HST New Residential Rental Property Rebate Eligibility
Persons that purchase, substantially renovate or build a new residential rental property with the intent to use it for long term residential rentals generally qualify for the rebate.
For greater clarity, a qualifying purchase will need to be a self-contained residential unit (does it have all the hallmarks of a home such as a kitchen, bathroom, etc.) that you own and is held for the purpose of long-term residential rentals.
Unlike, the New Housing Rebate for the purchase of a new home, which is usually credited to the purchase price by the builder, the New Residential Rental Property Rebate is usually applied for by the purchaser. For some people, this could create cashflow issues since the purchaser will need to pay the full amount of the GST/HST charged on the sale price and wait until for rebate amount to be paid after the application is filed.
GST/HST New Residential Rental Property Rebate Filing Deadline
The filing deadline for both the federal and provincial rebates is dependent on your situation but is generally two years from the date you take ownership of the property. Late filed rebate applications will not be accepted except in extraordinary circumstances.
For more information, please contact firstname.lastname@example.org or 1 844-GYTD-CPA