Real Estate

HST on Principal Residence?/Rental Property?

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  • Apr 22nd, 2020 6:51 am
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[OP]
Newbie
Dec 21, 2019
38 posts
3 upvotes

HST on Principal Residence?/Rental Property?

Hi, hope everyone is doing well :) .

I am purchasing a condo in Peel as a principal residence. The purpose of this purchase is really just to rent it out. I’ve been hearing mixed things about this.

Some are saying that I need to wait 1 year before renting it out? My realtor is telling me to basically buy it as a principal residence and I can just change my mind and rent it out after?

I’ve been reading online that if I’m renting it out, I need to pay the HST and then I can claim it back? The purchase agreement states that the HST is included in the purchase price. So do I pay the normal purchase price which includes the HST and then claim the HST after closing? How does this HST rebate really work? I’m understanding that the HST can be claimed from either principal residence or rental property but that their just claimed differently?

How do I go about this? Really confused, as this is my first property purchase.

Thanks for taking the time to read this, any advice would be appreciated.
20 replies
Deal Addict
Aug 30, 2011
3459 posts
1219 upvotes
Ottawa
If you're not going to live in it, then it is not your principal residence. Be wary of what your Realtor says, s/he is not the CRA.
Deal Addict
Feb 19, 2019
1038 posts
1399 upvotes
Stouffville ON
Emily0123 wrote: I am purchasing a condo in Peel as a principal residence. The purpose of this purchase is really just to rent it out. I’ve been hearing mixed things about this.
It’s one or the other, it is a principal residence, or it is not.
When buying precon in majority of cases the purchase price includes hst on the purchase price net of hst rebate.
Let’s assume the condo price is $500K, if you are buying it as principal residence that is what you will be paying, in the documents you will see that you are assigning the hst government rebate of $24K to the builder.
If you are buying it as an investment you can’t assign it to the builder, so you will pay $524to the builder, however if you have 1 year lease agreement in place you will be able to file for the $24K rebate with cra and get it back in approx. 2 months. Your total spend will be exactly the same, but you will be 24K out of pocket until you get the rebate back from the government.
If you are buying it as principal residence there will be factors to determine if it is your primary residence, as per cra:
The following are examples of some of the factors we may consider to determine whether a house is your or your relation’s, primary place of residence for purposes of the new housing rebate: ■ whether you consider the house as your main residence; ■ the length of time you inhabit the premises; and ■ the designation of that address on personal and public records. To be eligible for the new housing rebate, your intent to use the house as your or your relation’s, primary place of residence must be evident at the outset of buying, constructing, or substantially renovating the house. For rebate purposes, a house is not your primary place of residence if, for example, your intention is to use the house as your primary place of residence upon some more distant occasion, such as retirement. Further, a recreational cottage or an investment property is not your primary place of residence for rebate purposes. No new housing rebate is available in these cases.
The bottom line is claim it properly, your realtor is wrong since your intent is to have it as rental property, you also don’t have to wait one year to rent it out.
How long do you plan on renting it out, do you own another principal residence?
Here is all the info you need to know regarding claiming the rebate.
https://www.canada.ca/content/dam/cra-a ... 10-16e.pdf
Full Time and Full Service Realtor
[OP]
Newbie
Dec 21, 2019
38 posts
3 upvotes
GaryR28626 wrote: You can use the online HST rebate calculator to see how much you need to pay HST during closing (if declared as rental)

https://truecondos.com/calculators/hst- ... alculator/
So the condominium that I bought was for $600,000 and the purchase agreement states that the HST is included in the price. Why do we have to calculate HST again when it’s already in the price?
[OP]
Newbie
Dec 21, 2019
38 posts
3 upvotes
OttawaGardener wrote: If you're not going to live in it, then it is not your principal residence. Be wary of what your Realtor says, s/he is not the CRA.
What if we live in it for like 1 month as the principal residence and then rent it out?
[OP]
Newbie
Dec 21, 2019
38 posts
3 upvotes
senasena wrote: It’s one or the other, it is a principal residence, or it is not.
When buying precon in majority of cases the purchase price includes hst on the purchase price net of hst rebate.
Let’s assume the condo price is $500K, if you are buying it as principal residence that is what you will be paying, in the documents you will see that you are assigning the hst government rebate of $24K to the builder.
If you are buying it as an investment you can’t assign it to the builder, so you will pay $524to the builder, however if you have 1 year lease agreement in place you will be able to file for the $24K rebate with cra and get it back in approx. 2 months. Your total spend will be exactly the same, but you will be 24K out of pocket until you get the rebate back from the government.
If you are buying it as principal residence there will be factors to determine if it is your primary residence, as per cra:
The following are examples of some of the factors we may consider to determine whether a house is your or your relation’s, primary place of residence for purposes of the new housing rebate: ■ whether you consider the house as your main residence; ■ the length of time you inhabit the premises; and ■ the designation of that address on personal and public records. To be eligible for the new housing rebate, your intent to use the house as your or your relation’s, primary place of residence must be evident at the outset of buying, constructing, or substantially renovating the house. For rebate purposes, a house is not your primary place of residence if, for example, your intention is to use the house as your primary place of residence upon some more distant occasion, such as retirement. Further, a recreational cottage or an investment property is not your primary place of residence for rebate purposes. No new housing rebate is available in these cases.
The bottom line is claim it properly, your realtor is wrong since your intent is to have it as rental property, you also don’t have to wait one year to rent it out.
How long do you plan on renting it out, do you own another principal residence?
Here is all the info you need to know regarding claiming the rebate.
https://www.canada.ca/content/dam/cra-a ... 10-16e.pdf
So the condominium that I bought is actually resale and it was for $600,000, and the purchase agreement states that the HST is included in that price.

So from your scenario, if I am buying it as an investment for $500k, why do we have to pay $524k (+$24k HST) when the $500k already includes the HST?

I do plan on renting it but I could live in it for like a month or something if need be if it’ll make more sense money-wise.

I plan on renting it out for the next 3 to 5 years atleast. Nope, I do not own another principal residence this is going to be my first residence purchase (which is why I may sound naive haha).
Deal Addict
Nov 22, 2004
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You can check out this thread for additional clarity: Link
Realtor @ Royal LePage Ignite Realty
Deal Fanatic
Jul 3, 2011
5773 posts
2936 upvotes
Thornhill
Emily0123 wrote: The purchase agreement states that the HST is included in the purchase price.
are you buying from the builder, i its an assignment or are you buying from someone else who already owns the unit?
So do I pay the normal purchase price which includes the HST and then claim the HST after closing? How does this HST rebate really work? I’m understanding that the HST can be claimed from either principal residence or rental property but that their just claimed differently?

How do I go about this? Really confused, as this is my first property purchase.

Thanks for taking the time to read this, any advice would be appreciated.
The response to this depends on your answer to my question.
[OP]
Newbie
Dec 21, 2019
38 posts
3 upvotes
licenced wrote: are you buying from the builder, i its an assignment or are you buying from someone else who already owns the unit?

The response to this depends on your answer to my question.
Nope, not buying from the builder and it’s not an assignment. Yes, I am buying from someone else who already owns the unit who’s selling it with the HST included in the purchase price.
Deal Fanatic
Mar 27, 2004
5095 posts
3130 upvotes
Toronto
You are talking about buying a resale...but then you confusing it with hst rebate for pre con sales..which does not apply to your situation. My guess is your realtor is doing a piss poor job of addressing your concerns hence why you are now on here asking these questions.

You basically want to commit fraud. Your mortgage provider is going to provide you a rate based on the property being your primary residence when in fact you are going to lease it out, rental property mortgage rates are higher.

I assume you are also going to be claiming first time home buyer land transfer rebate. One of the requirements of that program is you must occupy the home as their principal residence within nine months of the date of transfer. If you get audit and they find out you lied you can be fined up to $4000.
Full-time Realtor
[OP]
Newbie
Dec 21, 2019
38 posts
3 upvotes
oasis100 wrote: You are talking about buying a resale...but then you confusing it with hst rebate for pre con sales..which does not apply to your situation. My guess is your realtor is doing a piss poor job of addressing your concerns hence why you are now on here asking these questions.

You basically want to commit fraud. Your mortgage provider is going to provide you a rate based on the property being your primary residence when in fact you are going to lease it out, rental property mortgage rates are higher.

I assume you are also going to be claiming first time home buyer land transfer rebate. One of the requirements of that program is you must occupy the home as their principal residence within nine months of the date of transfer. If you get audit and they find out you lied you can be fined up to $4000.
Ohh so I only have to worry about HST and HST rebates if it’s a preconstruction home? And yes my realtor says he is not familiar about rental rules/regulations. He said I can live in it for a bit and then decide to rent it out after and I’ll be fine.

That’s also part of my question, so how long do I have to occupy the home before I can rent it out under that plan?
Deal Addict
Feb 19, 2019
1038 posts
1399 upvotes
Stouffville ON
Emily0123 wrote: Ohh so I only have to worry about HST and HST rebates if it’s a preconstruction home? And yes my realtor says he is not familiar about rental rules/regulations. He said I can live in it for a bit and then decide to rent it out after and I’ll be fine.

That’s also part of my question, so how long do I have to occupy the home before I can rent it out under that plan?
You should find a realtor that is familiar with rules and regulations, your agent should ensure you have the understanding of what you are getting into, and if he or she can't provide the info you should be referred to a professional who can.
You are buying resale, all of us were under impression you were buying preconstruction, in case of resale there is no hst, the price you agree on is the price you pay, there are no rebates, credits, dealing with cra etc.
What you are asking about ( I think) is a standard clause in the agreement of purchase and sale, the options regarding hst are "included in", or "in addition to". "Included in" means you will not be paying hst in addition to the purchase price.
Living there for a month or a short period of time doesn't do anything for you. You should find an accountant who can explain the rules and implications in the manner you can understand and be comfortable with.
If you plan on renting it for few years and than moving in than you definitely should seek an advise of an accountant to explain to you rules and implications of the change of use, subsection 45(3)
https://www.canada.ca/en/revenue-agency ... dence.html
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Deal Addict
Aug 30, 2011
3459 posts
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Ottawa
As others have said, don't get your tax advice from your Realtor. Some know the answers to your questions, but your Realtor does not. Get an accountant.

Live it in as your principal residence for at least a year, and you should be fine. But actually live in it, the CRA will want proof.
Deal Fanatic
Jul 3, 2011
5773 posts
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Thornhill
Oasis100 gave you the answer in the first line of his post.

FYI, the standard Agreement of Purchase and Sale for a resale property includes a section that is used to identify if HST is on top of the purchase price or included in the purchase price. Because it's a resale condo it says HST is included, which puts the owner on the hook to pay any HST in case there is actually an HST component which sometimes happens but that's a whole other discussion
Deal Addict
Mar 3, 2018
1849 posts
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GTA
As Ottawagardener mentioned move in for a year changing all addresses to the condo to support your claim with CRA. In the year you start renting file an election under subsec. 45(2) in your tax return to continue to designate your rented condo as your principal residence. This is valid for up to four years. This will reduce any future capital gains tax when eventually you sell.
Deal Addict
User avatar
Dec 13, 2016
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With all due respect, your realtor doesn't give a crap as long as he gets his commission. You think you can sue him after for wrong information?

They can and will nail you for this just because it's so easy. At the very least it is going to be a headache to deal with them. CRA that is.

If you're buying to rent then it's a rental. Or live in it first then move out.
Sr. Member
User avatar
Apr 26, 2010
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Richmond Hill
Realtor is one thing but your lawyer should be able to clear everything up for you
Jr. Member
Jan 26, 2020
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licenced wrote: are you buying from the builder, i its an assignment or are you buying from someone else who already owns the unit?

The response to this depends on your answer to my question.

i came across this thread.. my cousin buying a condo on assignment and plan to rent it out.. the seller says that "HST will be included in price" .. seller will be paying HST on deposit + profit. we are not sure if we still have to pay hst on closing and claim it back?
Newbie
Jun 25, 2015
94 posts
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Toronto, ON
nucats wrote: i came across this thread.. my cousin buying a condo on assignment and plan to rent it out.. the seller says that "HST will be included in price" .. seller will be paying HST on deposit + profit. we are not sure if we still have to pay hst on closing and claim it back?
You will if builder requests it but you worded it right.

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