Mar 30 | Posted by Barry

This summer, the Harmonized Sales Tax (HST) will come into effect in Ontario. Simply put, instead of paying 5% GST and 8% PST, you will pay 13% HST. While the math looks easy, one has to keep in mind that before this, most services were only taxed at the 5% rate (i.e. GST only). Now, with the Harmonized Sales Tax, the rate of tax on services will increase by more than double to 13%.

For new home construction, the HST tax applies to the entire sale price, although in most cases you will see this tax is “imbedded” in the asking (and closing) price of the home. Many builders recognize that most buyers are unwilling to pay the previous GST tax and the same attitude will likely prevail when HST takes hold.

What does this mean to the buyer of a resale home (i.e. not first time sale)? The buyer will see an increase in the tax portion on services undertaken in the purchase price (such as home inspections, legal services, moving and cleaning) but will not have to pay HST on the purchase price.

What does this mean to the seller of a home? There will be additional expenses related to the agent's commission and other such seller services.

HST will likely have a limited impact on the buying and selling of existing homes. It will be annoying to see the amount of the taxes paid, but the total expense will not be significant in resale transactions comparison to the overall transaction.