The Ontario Condo Rebate, formally known as New Residential Rental Property Rebate, allows landlords to recover the Harmonized Sales Tax (HST) they paid the government for a condo. The tax program intends to lower the prices of condo units in hopes that landlords would reduce rent, which would make shelter and accommodation more affordable for the homeless.
Canadian and foreign condo owners who will lease their unit to someone else are eligible for applying for a rebate. This program only requires landlords to provide proof that someone is leasing the property they own for at least a year. However, the program does not explicitly require landlords to charge lower rent. Maximize your rent and rebate to break even in as little as three years with the help of this pro-landlord tax policy.
How to apply for Ontario Condo rebate?
Landlords would still have to pay the HST in full when buying a new condo. Only when you have closed a lease agreement with someone can you apply for the rebate with the CRA. The lease agreement should state that the property would be rented for at least a year, following the Ontario Condo rebate’s policy. Submit to the CRA a copy of that lease agreement, along with a filled-out Form GST524, to begin the rebate claiming process. Depending on your specific situation, the CRA may request additional documents and papers.
If you decide to change the property’s use type from rental to personal-residential within the one-year minimum, you are no longer eligible for HST rebate. You will have to repay the rebate if you sold your condo or changed the property’s use type within a year after you received the money. However, you can keep the money if you sold the condo to a person who will use the unit as their principal residence.
How are Ontario condo rebates calculated?
The rebates are calculated based on a maximum of 13% HST on every unit sold. A portion of the HST you pay goes to federal coffers while another portion of that amount will go to provincial funds. This means that a CAN$1,000,000 condo unit already includes CAN$130,000 HST in it. Initially, this is how large you stand to regain if you decide to rent your property for a year. However, recent tax policies in Ontario have slashed the refundable amount to a maximum of CAN$24,000, for condos priced at more than CAN$450,000. For condos bought at a lower price, the CRA would use a sliding scale of maximum HST rebates corresponding to the condo purchase price.
How long does the Ontario Condo rebate claim process last?
Upon approval by the CRA, it takes at least three months for processing. Then, the CRA would deposit the rebate in your bank account.
How long is a property eligible for HST rebate?
When you buy a condo unit, the rebate is already included in its sale price. You only have two years from the date of sale closure to apply for a rebate. This means you have to decide as soon as possible if you’re planning to get your money back from the CRA and turn your condo unit for rental use.
Strategies to maximize your condo rebate
Get back your money and earn a windfall from rent by strategizing the timing of your claim and your planned change of use-type. You can also decide to rent the property for a lucrative rate for five years or more to make your investment worth since the rebate policies don’t limit you to the amount of rent you can charge.
If you’re looking for a real estate agent to help you buy a home in Ontario, get in touch with us today to see how we can help!