HST in a Residential Sale

Unsure of when HST is applied in a residential purchase? Today’s Real Estate Educational Friday will clear up any confusion that you may have.

Homes are considered a “good”, but are all home purchases subject to HST?

The answer is, no. There are some situations where HST is added to the purchase price and services and other times when it is not.

  • When is HST not added?

Resale homes, also known as previously owned homes, are HST-exempt. The price negotiated between the seller and the buyer is the actual price of the home – no need to add that 13%.

  • When is HST added (residential)?

There are three instances where HST is added to residential real estate:

  1. New construction or substantially renovated home
  2. Residential property, but contains a portion of non-personal use vacant land
  3. Services associated with real estate

New Construction:
Buying a new home, HST is added to the purchase price. This includes a brand new home as well as homes that are purchased during pre-construction. HST is also added to a home that has a significant amount of renovations. This refers to renovations when over 90% of the interior of the home has been renovated or replaced.

In most instances in new builds, the builder includes the HST in the purchase price already, but you may still find other builders who add it on. Please ensure you know which the builder has chosen to do so you won’t have any surprises on closing.

Also, if you are purchasing a pre-construction home for investment purposes, and additional HST will be added to the property on closing. You may be able to recover most or all of the HST by leasing out the property in Ontario, in which you can file for an HST rebate.

Non-Personal Use of Vacant Land:
If you buy a property that is on a large portion of vacant land, HST may be owed on the what is seen as non-personal use of the land. If you can prove that the vacant land is used for personal use, then you will be exempt from HST.

Real Estate Services:
HST is owed on services associated with real estate. This includes realtor commissions, home inspectors, stagers, lawyers, trades, etc.