HST and Resale Homes

Q. Do I have to pay HST if I purchase a resale home, meaning a house that was previously owned?

A. Resale homes, also known as previously owned homes, are HST-exempt. The price negotiated between the seller and the buyer is the actual price of the home – no need to add that 13%.

HST, like GST before it, can only be charged once on any item being sold. Therefore, HST must be paid on the initial home purchase, but not when they are resold by the original owners or any owner thereafter.

Q. What about brand new homes?

A. Yes, new homes are subject to HST, but fortunately for those who do choose to purchase a newly built or substantially renovated home, HST rebates are available. Check with Revenue Canada or a real estate lawyer for details.

Q. Will I have to pay HST on other common services associated with the home buying process?

A. Yes, HST is payable on certain services associated with the purchase of a home, such as legal fees, real estate commissions, moving fees, appraisals, and home renovation services. These fall under the category of closing costs and should be part of your budget considerations when determining how much you want to spend on a home.

Q. Are there any exceptions to this HST exemption?

A. Yes, for example, if the home being purchased was first bought by a corporation and GST was never paid on it; or if the home has been substantially renovated from its original structure, it will be subject to HST. The Canada Revenue Agency defines substantially renovated as follows: “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.”

Many resale homes have been renovated, sometimes significantly (new kitchen and bathrooms, new flooring and windows, etc.) but if the home wasn’t near-gutted and rebuilt, it probably doesn’t qualify as “substantially renovated” under the CRA’s definition and therefore, no HST would apply to the purchase of that home.

If you are not sure whether a specific home has been renovated enough to incur HST, check with your accountant, lawyer, or tax professional.