I read this article in the realtor news letter this month and I didn’t think I could explain the new HST rules any better so I thought I would republish this here for you all to read. Hope this sheds some light on the situation.
HST myths vs. facts
One of the many hats a REALTOR® wears is the ‘educator’ cap. And at no time has this been more key than right now, as we count down to the implementation of the Harmonized Sales Tax (HST) in BC. It’s why the Board has sold out four HST seminars. Members want to arm themselves with the necessary information for their clients and understand the HST implications for their own businesses, too. Although it doesn’t come into effect until July 1, 2010, the public is under a number of misconceptions regarding how the HST applies to the sale of homes and real estate services. It’s up to professional REALTORS® to help their clients sort through the misinformation and understand the facts.
Here are some common public myths about the HST and how it applies to real estate:
MYTH: The HST applies to homes that ‘look and feel’ new – one or two years old and listed for the first time on the MLS® after having been sold once by the developer.
FACT: The HST applies to new homes being sold for the first time and homes that have been substantially renovated (90% or more), similar to the current application of the GST on new homes. The purchase agreement has to be signed after November 18, 2009, with possession dated on or after July 1, 2010.
MYTH: The HST is a new tax burden of 12 per cent on new homes worth more than $525,000. A typical new detached home in White Rock ($800,000) will cost $96,000 more after July 1, 2010 (not even factoring in the Property Transfer Tax).
FACT: After July 1, 2010, a new $800,000 home in White Rock will cost $11,510 more than it would have cost on June 30. First, the 5 per cent GST has always applied to new homes. Second, the provincial HST rebate of $26,250 is available for the purchase of all new homes worth more than $525,000, even much higher-priced homes. See the following calculation taking into account the PTT as well.
||After July 1
(NOTE: The provincial government estimates that prices of new homes currently include about 2 per cent embedded provincial sales tax paid on the materials used in construction. The government anticipates that prices of new homes will decrease by 2 per cent after the HST is implemented because builders will be able to recover the tax paid on materials through input tax credits.)
Need help calculating the HST and available rebates on a new home? The Ministry of Finance has just launched a New Home HST Calculator accessible via http://hst.blog.gov.bc.ca
(under Helpful Links).
MYTH: Everything to do with my new home will be levied the HST: All fees for professional services in the purchase of the home (REALTOR®, legal and appraisal fees, etc.); home insurance; utilities (natural gas, hydro and electricity); and, the purchase of new furniture and electronics.
FACT: Not everything will be impacted by the HST.
YES – HST will apply to all fees for professional services in the purchase or sale of a new OR resale home (as does the 5 per cent GST now). Therefore, all of these services will cost 7 per cent more.
NO – Home insurance is exempt from the HST.
NO – Home heating fuels are all eligible for a point of sale rebate and will see no impact from the HST.
NO – Furniture and electronics will see no tax change. The 12 per cent (GST and PST combined) already applies to furniture and electronics, therefore buyers will see no difference.
As the British Columbia Real Estate Association recently reiterated to the BC government, shelter taxes (HST and PTT) significantly contribute to the cost of a home purchase, which is why we continue to recommend the government to make further changes to both the HST and the PTT. However, it’s important for the public to know that although the tax burden on housing is set to increase on July 1, it would have been worse had it not been for REALTORS® and other representatives in the housing industry. BCREA successfully lobbied to mitigate the impact of the HST – getting the threshold increased to $525,000 from $400,000 and the HST rebate raised to $26,250 from $20,000. As Deanna Horn explains in her column inside this issue of NewsReal, Fraser Valley members can significantly improve their public image by communicating two key messages to their clients regarding the HST. REALTORS®’ role in reducing the HST burden is one; keep reading inside to find out number two.
Taken from “NewsReal” May 10, 2010 issue 5519
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