If you are like pretty much everybody else in BC, you are wondering exactly what the deal is with the HST. The tax comes into effect July 1, so a lot of people are thinking about it.
How much impact does it have? And exactly how much more money will it really add to the cost of your home?
The recent Georgia Straight article gave a good overview of the story around the tax and its current impact on Vancouver real estate market. But in the end, it is pretty ambivalent about whether all the hubbub is justified.
For starters, be sure you understand exactly what it all means. (This is the boring part.) The BC Government website breaks down all the nuts and bolts of the tax, and where and how it applies and differs from the old system.
Scroll down that page until you find the section heading “New Housing Rebate.” This is the part that matters to us.
Basically, purchasers of new homes – who used to pay only the 5% GST – will now pay an added 7% tax under the HST, for a total of 12% tax on the purchase price.
However, the first $525,000 qualifies for a 5% rebate on the tax. This rebate maxes out at $26,250.
Therefore, homes under $525,000 will only see a 2% increase over the tax that applied before the HST.
For homes over $525,000, the full 12% HST applies only to the amount that exceeds that price. So basically, you’ll add 12% tax to the full purchase price, subtract the $26,250 (rebate on the first $525,000), and what you have left is what you will pay in tax. Compared to pre-HST days, this nets out to a 7% increase, less $26,250.
But many of the new homes available at Spruce are close to or below that threshold; these will only see the 2% nudge in tax.
Clear enough? If you have any other questions, please call us. We are always happy to help however we can.
