Wednesday 15 January 2020

Is the sale of a resale or "used" home HST taxable?

New homes are HST taxed, but resale or "used" homes are generally NOT taxed.

So if you're selling a personal home you have lived in, there shouldn't be any HST tax on the sale.

Sellers and buyers should note that there will, of course, be HST or PST taxes on services related to the sale, such as legal fees, real estate commission, insurance and so on - just not on the sale of the home itself.


Having said that, if a resale home is so extensively renovated that it essentially a new home, then the tax rules do deem it to be 'new' for the purpose of HST.  But we're talking about pretty extensive renovations, like tearing down to the studs and redoing the whole home.  Most general renovations - such as new kitchen and bathrooms, new flooring, windows, etc - shouldn't be enough to qualify.

There can also be situations around businesses and business ownership that could create HST obligations.

In most cases of owner-occupied resale residential there shouldn't be any concern, but if you have any doubts or questions then consulting a tax professional would be a good idea.

HST Clause

In the standard OREA Agreement of Purchase and Sale, generally used by professional REALTORS® in Ontario, there is a clause dealing with HST on the sale of the property:
If the sale of the property (Real Property as described above) is subject to Harmonized Sales Tax (HST), then such tax shall be [included in / in addition to] the Purchase Price. If the sale of the property is not subject to HST, Seller agrees to certify on or before closing, that the sale of the property is not subject to HST. Any HST on chattels, if applicable, is not included in the Purchase Price.
If the clause is written such that HST is 'included in' the purchase price, then any HST payable is the obligation of the Seller and the Buyer won't have to worry about any surprises.  Because residential shouldn't be HST-taxable, this is the normal thing to see.

However, if it is written as 'in addition to' the purchase price then any HST payable would be the responsibility of the Buyer.  It may just be a stubborn and overly-cautious Seller, but normally working with a buyer, I would see a change to 'in addition to' as a potential red flag that would require some clarification.

As always, make sure you're working with an experienced and reliable real estate professional who will catch little details like this, explain them to you, and provide follow-up as necessary.

NOTE: this article is for general information purpose and is not to be viewed as professional legal or tax advice. Always consult a professional where appropriate.

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