HST (TAX)- What You Need to Know Now...if your selling.

HST (TAX)- What You Need to Know

April 8, 2010 by 1stoprealestate.ca

I just finished writing the blog and computer errored… should have known better to write it straight in the blog program without saving it.  Anyways… having vented, 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.

Transitional Rules:

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.

Jas Jagpal, Remax Real Estate Consultant – 647-272-6629  jasjagpal@rogers.com

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Posted in General, Jas Jagpal - Toronto Real Estate Blogs, Toronto Real Estate Stats | Tagged Harmonized Sales, Harmonized Sales Tax, HST, HST affects on Real Estate Transactions, HST affects on Sellers of houses, HST in Ontario, Seller HST costs on a Real Estate Transaction | Leave a Comment »

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