Reminder: No HST on Resale Homes

There is no harmonized sales tax (HST) on resale homes.

A good way to remember what the Harmonized Sales Tax (HST) applies to is to think of the items that were subject to GST prior to the HST coming into effect on July 1, 2010. In terms of housing, the GST only applied to newly constructed homes and substantially renovated homes, not to previously owned homes, the Board notes.

The same goes with the HST. There is no HST on resale homes -- resale housing has never been subject to the GST or the Provincial Sales Tax (PST) in BC, it's only subject to the Property Transfer Tax (PTT).  

However, the HST is now payable on certain services associated with the purchase of a home (resale or new) because these were subject to GST-- real estate commissions, moving fees, appraisals and legal fees.

How does the Canada Revenue Agency define "substantially renovated'?  "Major changes have to be made to meet the definition of a substantial renovation. In a major renovation project, the interior of a building is essentially gutted. This type of renovation project qualifies as a substantial renovation. Generally, 90% or more of the interior of an existing house is the minimum that has to be removed or replaced to qualify as a substantial renovation."

To be absolutely certain though, prospective buyers should always check with their Realtor to make certain that the home they're looking to buy is not subject to HST.

It should be noted that even with HST on new housing, there is a small tax break on new (or substantially renovated) homes in BC: the provincial government provides a rebate of 71.43% of the provincial portion of the HST, to a maximum of $26,250, for new housing purchased as a primary residence. The government set the rebate level to ensure that new homes that cost less than BC's $525,000 threshold would face approximately the same amount of tax as they did before July 1 with only the GST. Purchasers of new homes over $525,000 are eligible for the maximum rebate of $26,250.

For example, even with a substantial $37,730 in new taxes, a new $550,000 home in BC ends up costing about the same as it did before the HST was implemented because of the rebate and removal of the embedded PST in the construction costs.  Fortunately, homebuyers choosing to purchase a resale home don't have to worry about paying the new tax.

For more detailed information about what the HST applies to and doesn't apply to in BC, go to hstinbc.ca.

And here's a handy BC HST & Property Transfer Tax Calculator created by Ultimate Calculators.