I recall the story a few years ago of Charles Silveira, a man from New Jersey who was convinced by woman – a psychic – to buy her a $700,000 (U.S.) home. As the story goes, he also paid her $247,850 over time because she apparently needed to make a golden statue for him to ward off negativity. According to The Star-Ledger in New Jersey, Mr. Silveira filed a lawsuit to recover his money and evict her from the home.
If Mr. Silveira were living in Canada today, he might also be eligible for cash back from the government for his home purchase. Not because a psychic convinced him to buy it (sorry, there’s no tax relief for that), but simply because our government offers a GST/HST New Housing Rebate, which can also apply to certain home renovations. Not many are aware of this rebate, and it could mean cash in your pocket.
The rebate I’m talking about will allow you to recover some of the goods and services tax (GST) or the federal part of the harmonized sales tax (HST) paid for a new or substantially renovated house that is to be used as your, or your relation’s, primary place of residence.
Generally, the taxman will distinguish between an “owner-built” house and a house purchased from a builder. In either case, you may be entitled to the rebate, but the forms you have to file are different.
Specifically, you might qualify for an “owner-built” rebate if you: (1) built, or hired someone else to build, a house on land that you already owned, (2) substantially renovated, or hired someone to renovate, your existing house (at least 90 per cent of the interior must be removed or replaced to count as a substantial renovation), (3) built, or hired someone to build, a major addition to your house that at least doubles the size of the living area (for example, the addition of a full second storey to an existing bungalow), or (4) converted a non-residential property into your house.
If you purchased a house from a builder, you may be entitled to the rebate if you: (1) purchased a new or substantially renovated house from a builder, or (2) purchased a new or substantially renovated home from the builder where you leased the land from the builder (and the lease is for 20 years or more or gives you the option to buy the land).
What type of property will qualify for this rebate? A “house” for purposes of the rebate generally includes a detached or semi-detached single-unit house, a duplex, condominium unit, townhouse, a unit in a co-operative housing corporation, a mobile home (including a modular home) and a floating home. A house can also include a bed and breakfast or similar place where rooms are rented on a short-term basis (although the building must be used more than 50 per cent as your primary place of residence if you hope to claim a rebate for the whole building).
How much can you expect back from the government? If you qualify, you can expect a federal rebate of up to $6,300. The actual federal rebate is clawed back somewhat if the value of your property is over $350,000, and disappears entirely if your property is worth $450,000 or more after the building or renovation. If you can’t claim the full federal rebate, you may also be eligible for a provincial rebate. British Columbia (for HST paid before April 1, 2013) and Ontario offer rebates that can be as high as $26,250 and $24,000 respectively. Nova Scotia also offers a rebate. Other provinces may soon offer rebates as well.
Be sure to get a copy of the booklet RC4028, GST/HST New Housing Rebate, available on the taxman’s website at cra.gc.ca and which includes provincial forms and instruction – there’s lots of information there.
You’ll need to file the applicable forms to claim the rebate: Form GST191-WS, Construction Summary Worksheet, and Form GST191, GST/HST New Housing Rebate Application for Owner-Built Houses or Form GST190, GST/HST New Housing Rebate Application for Houses Purchased from a Builder.
All owners of a property must be individuals to qualify for the rebate (no owner can be a partnership or corporation). As for deadlines, you can file for the rebate generally within two years following the substantial completion of the building or renovation of your house. Finally, if you bought or built a home or other building to rent out to individuals as a place of residence, you may be entitled to a rebate as well (see Guide RC4231 on CRA’s website).
Tim Cestnick is the president of WaterStreet Family Offices and the author of several tax and personal finance books.