Relatives not included in the HST rebate rules

Written by Andres Bryant. Posted in Home

The Harmonized Sales Tax for new homes is available to anyone who intends to purchase a home or condominium from a builder, or who hires someone to build him a new residence instead. Not few are the situations when buyers of new residences and condominiums are taken by surprise by the request of the Canada Revenue Agency to pay back the Harmonized Sales Tax rebates they received upon closing. Many mortgage lenders insist on placing a third person in the title, person who is not even a close relation of the homeowner, owing to the fact that the buyer himself does not qualify for the mortgage. To put it briefly, all this is the result of pure ignorance. Since not everyone is aware of what new condo HST rebate implies, it is necessary to shed some light on the subject.

How does HST rebate work?

Although the government implemented the tax since 2010, there is still some confusion about how it really works. The purpose of introducing the tax was to stimulate business competition. HST affects the purchase of any new home or condominium, the tax being included in the selling price of the house. This means that the price of houses on the market is higher than it used to be. However, special measures were taken in order to help buyers cope with the financial pressure; more precisely, the HST rebate that allows owners to recover the money invested in the purchase. The rebate is available for those who buy newly constructed or renovated homes or have a home built for them.

Making the home your primary residence

Although buyers are entitled to HST rebate, the refund does not apply to investors as well. The eligibility depends on the intention at the time of buying. In other words, if you have purchased the home to use it as a primary residence for yourself or your family, then you have the right to demand a full refund. You should do this immediately in order to avoid the tax being added to the sale price and pay close attention when you purchase a home together with a relative. The reason for this is that one of the persons registered in the title does not qualify for rebate, then the others are excluded from eligibility as well. What happens is that the CRA will demand the money to be paid back with interest.

How long should occupy the residence

If you are eligible for the refund, then you will be required to prove that the home was purchased with the intention of becoming your primary residence. Taking into consideration that the authorities cannot take you for your word, certain factors will be taken into consideration to see if you qualify. The most important aspect is the time spent in the residence and the time you have to reside in the building depends on each case. Additionally, investigations will be carried out so as to determine whether the home is registered in the public records as the primary one.

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