Thinking of buying or selling your home next year? One BIG reason you should do it soon.
On Tuesday, November 17, 2009 the Government of Ontario introduced Bill 218, the Ontario Tax Plan for More Jobs and Growth Act, 2009.
What does this have to do with real estate?
Well, according to the Ontario Real Estate Association (OREA) it will mean a new assault on Ontario homeowners, purchasers and sellers.
Effective July 1, 2010, home buyers and sellers will pay 8 per cent more on legal fees, appraisals, real estate commissions, home inspection fees, and moving costs, amounting to approximately $1,500 in new taxes to the average residential real estate transaction in Ontario.
What is HST?
A harmonized sales tax (HST) is the result of a combination of the 8 % Provincial Sales Tax (PST) and the 5% Goods and Services Tax (GST). The PST will be levied on a variety of real estate related services, including legal fees, commissions and home inspections which are currently exempt from PST.
A HST will increase the costs of doing business for many Ontario’s professionals – lawyers, real estate representatives, inspectors, movers and appraisers. Today these professionals must charge 5 per cent GST on the fees they charge to clients. Under a harmonized tax arrangement, these professionals would charge their clients for their services at a rate of 13 per cent!
What is the bottom line?
On resale transactions buyers and sellers will face an additional tax. For a single detached house priced at $302,354, a HST could add $1449 in new taxes to closing costs (see Table 1). In total, a HST will add $263 million annually in new taxes to resale home transactions.
Table 1: HST and Average Resale Home in Ontario ($302,354)
| Taxable Service |
Current Tax Payable |
HST Tax Payable |
New Taxes |
| Legal Costs |
$50.00 |
$130.00 |
$80.00 |
| Sample Real Estate Commission |
$756.00 |
$1,965.00 |
$1,209.00 |
| Home Inspection |
$20.00 |
$52.00 |
$32.00 |
| Moving Costs |
$50.00 |
$130.00 |
$80.00 |
| Home Appraisal |
$15.00 |
$39.00 |
$24.00 |
| Mandatory Home Energy Audit |
$15.00 |
$39.00 |
$24.00 |
|
Total Estimated New Tax: |
$1,449.00 |
|
1 Based on 5% commission example; note that all commissions are negotiable.
Neil Lacey, B.BA
Sales Representative
Royal LePage Real Estate Services Ltd., Brokerage
Direct: 905-330-1653
Office: 905-338-3737
neil@royallepage.ca
www.neillacey.com
