HST (TAX)- What You Need to Know HOME Sellers!
let me tell you how HST will affect Sellers of Real Estate and in another post I’ll mention the affects on Buyers.
So What is HST? – 13% Tax (Harmonizing of GST (5%) and PST (8%) – hence HST
When does it take affect? – July 1st, 2010
HST will apply on all current services you pay GST on. So you will pay on Realtor commissions, Lawyer fees, Inspections, Maintenance, Moving Costs, etc so on and on in every days routine,this is now becoming part of everydays’ routine as we are used to higher tax in NorthAmerica wide.
1. If you list May 1st and close July 5th. As long as 90% of the services related to your Real Estate transaction (open houses, getting mortgages, inspections, title search, etc.) occured prior to July 1st… then you won’t have to pay HST just the GST.
2. If you list May 1st and close Aug 1st. Since the 90% rule won’t apply you will now pay on a weighted scale. 2 months (2/3) GST and 1 month (1/3) of HST on all your closing cost (commission, lawyer fees, etc.). All costs incurred prior to July 1st would only have incurred GST. Movers would have charged entire HST.
How much will you be paying extra?
Lets calculate using an average GTA price of $400,000 for a single family house.
Seller would pay:
1. Commission 3.5% – 5% = $1120 to $1600 more
2. Lawyer ($1000 – $2000) = $80- $160 more
3. Moving ($1000-$2000)= $80 – $160 more
4. Pre-inspection ($300-$500) = up to $40 more
So Sellers are looking at around $2000 added to closing costs. Nothing too significant that will cause a dent in the Toronto market. The Toronto Land Transfer Tax was significantly more expensive and had no affect. I think surrounding municipalities will probably add their own form on Land Transfer Tax in the upcoming 3-5 years.
In my next post I will talk about how GST affects Buyers.
Have questions? contact Vijay Gandhi, Re/max Dynasty – Real Estate Consultant – 647-267-6338 firstname.lastname@example.org