Real Estate

New home HST credit - how much tax should I pay on upgrades?

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  • Jun 4th, 2016 8:08 am
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[OP]
Jr. Member
Feb 28, 2011
100 posts
21 upvotes
Ottawa

New home HST credit - how much tax should I pay on upgrades?

Hi --

I'm looking for some advice from those who have experience with new build HST credit in Ontario. I signed a purchase agreement to buy a newly build townhouse. I understand that the base price I paid already has the HST credit that the builder will be receiving after completion, factored in. However, I'm currently choosing the upgrades for the house, and I'm being quoted upgrades + HST. Should I not get a rebate on HST for upgrades too? Here's a mathematical example, as I understand the situation:

Purchase price: $350,000 (this, I understand, includes the HST rebate that builder will receive upon completion)
Pre-tax price: $350,000/(1.07) = $327,103 (factoring out 5% GST and 25% of the 8% PST, since 75% of the PST is rebated)

Desired, pre-tax value of upgrades: $30,000
New, pre-tax price, of the home: $327,103 + $30,000 = $357,000

GST portion on new price: $357,103 * 0.05 = $17,855
PST portion on new price, but with 75% rebate = $357,103 * (0.08 * 0.75) = $7,142

Total price I think I should pay: $357,000 + $17,855 + $7,142 = $382,100
Total rebate that will granted to the builder: $357,103 * 0.06 = $21,426 (versus $19,626, which would have been the credit received if I didn't pick any upgrades).

Am I on the right track here? Or, does HST credit not apply to upgrades? Any help would be much appreciated!

(btw, I got most of the info for my calculations here: http://www.hstrebatenewhomes.ca)
2 replies
Newbie
Mar 8, 2017
99 posts
108 upvotes
Ottawa
theirishdancer wrote: Hi --

I'm looking for some advice from those who have experience with new build HST credit in Ontario. I signed a purchase agreement to buy a newly build townhouse. I understand that the base price I paid already has the HST credit that the builder will be receiving after completion, factored in. However, I'm currently choosing the upgrades for the house, and I'm being quoted upgrades + HST. Should I not get a rebate on HST for upgrades too? Here's a mathematical example, as I understand the situation:

Purchase price: $350,000 (this, I understand, includes the HST rebate that builder will receive upon completion)
Pre-tax price: $350,000/(1.07) = $327,103 (factoring out 5% GST and 25% of the 8% PST, since 75% of the PST is rebated)

Desired, pre-tax value of upgrades: $30,000
New, pre-tax price, of the home: $327,103 + $30,000 = $357,000

GST portion on new price: $357,103 * 0.05 = $17,855
PST portion on new price, but with 75% rebate = $357,103 * (0.08 * 0.75) = $7,142

Total price I think I should pay: $357,000 + $17,855 + $7,142 = $382,100
Total rebate that will granted to the builder: $357,103 * 0.06 = $21,426 (versus $19,626, which would have been the credit received if I didn't pick any upgrades).

Am I on the right track here? Or, does HST credit not apply to upgrades? Any help would be much appreciated!

(btw, I got most of the info for my calculations here: http://www.hstrebatenewhomes.ca)

I'm in accounting and deal with these - the HST payable and rebates differ when the gross value of the house in under 368,200, 368,200-424,850 or over 424,850. There is also a limit to the rebate of 24k. If you would like, PM me the Gross purchase price, both with and without the upgrades and I can calculate the full HST rebate. You might end up paying HST that will not be offset by the rebate once you're over a certain threshold.
Deal Expert
User avatar
Jul 30, 2007
29161 posts
14913 upvotes
Toronto
hst rebate is not received by builder, it is assigned from you so the builder can claim for you (as it is shown as a credit to you on the Statement of Adjustments on closing). It should be in your P&S agreement on this tax assignment.

Upgrade charges are not part of this P&S agreement, if you have selected $1000 in upgrade, you pay HST on top and the builder collects this and forward to CRA on closing. No housing rebate is applicable here.

For example, even if the builder gives a $1000 as upgrade allowance (as a credit/cash consideration) to spend.

You select $1,000 in tiles, decor center will add 13% to this goods selected = amount charged is $1,130

Less: $1,000 builder credit allowance

Net amount owed to builder $130.

On closing, builder forward this $130 to CRA.

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