New Residential Rental Property Rebate-How to Calculate
New Residential Rental Property Rebate (NRRP)
The majority of builders in Ontario include the HST rebate in the sale price of a home when they market to the public. This means that they price the property lower with the expectation that they are claiming the HST rebate back on behalf of the buyer.
1. Prepare for the extra money for closing.
As investors, we cannot declare that we are moving into the new home. As a result, we cannot transfer the right to claim the HST rebate to the builder. Since the builder cannot claim the HST rebate on behalf of us, the builder is out of pocket for as much as $30,000. The investor will be required to come up with the extra cash on closing to reimburse the builder the HST rebate he would otherwise get. Be prepared to come up with the extra money which can be as much as $30,000 upon closing.
2. Sign a one year lease with tenants
The foundation to qualify for this NRRP is that the new home is used as a primary residence in the long run by someone. A one year lease is required by Canada Revenue Agency (CRA) to prove this.
3. Compute the rebate amount.
Generally speaking, the rebate amount is calculated as 36% of the federal portion of HST to a maximum of $6,300 plus 75% of the provincial portion of HST to a maximum of $24,000 in Ontario.
Here is an example of how to calculate the HST rebate:
Pre-HST house price is $350,000
Federal portion of HST is 5% x $300,000 = $17500
Federal portion of the rebate amount is $17,500 x 36% = $6,300 (maximum of $6,300)
Ontario portion of HST is 8% x $350,000 = $28,000
Ontario portion of HST rebate = $28,000 x 75% = $21,000 (maximum of $24,000)
Total rebate = $6,300 + $21,000 = $27,300
4. Fill out the application form and prepare all the required documents
- One year lease
- Agreement of Purchase and Sale
- Statement of Adjustments – it is part of the closing documents that you can obtain from your lawyer.
- GST/HST New Residential Rental Property Rebate Application
- Ontario Rebate Schedule
5. File it on time
The investor has two years to file the rebate application. Our research shows that the CRA takes about two months to refund the money.
As investors, we are eligible to claim the same amount of HST housing rebate under a different set of rules. We should definitely do it right the first time so CRA cannot challenge us.
For more information, visit the CRA website or Contact us today!