HST News Flash

* Comes into effect July 1, 2010*
Interesting Article below.

This is worth knowing, as it could effect closing costs for some clients, as they will look to us, for advice.
http://www.thestar.com/article/656164 <http://www.thestar.com/article/656164> I have attached the link, as it is well worth sharing .

Lobbying nets 'major' changes to HST on new home purchases

Full HST will be charged only on the amount of price over $400,000, not entire purchase price
Jun 27, 2009 04:30 AM

Tracy Hanes
Toronto Star

Changes to how the harmonized sales tax will be charged on new homes priced over $400,000 will help protect affordability, according to two major Ontario homebuilders' groups.

Last week, the provincial government agreed to move to a progressive tax structure when the HST comes into effect July 1, 2010, significantly reducing the tax homebuyers will have to pay on new houses above that threshold.

Under the original plan, homes priced below $400,000 would have qualified for a 75 per cent rebate of the provincial portion of the new tax (which combines provincial sales tax and the goods and services tax), ensuring that there would have been been no more taxes charged on new houses than there are currently (about 2 per cent).

However, the rebate would have been scaled after $400,000 and would not have applied at all to homes priced at $500,000 or more, which would have added $30,000 in new taxes to half-million dollar houses.

But after vigorous lobbying from the Building Industry and Land Development Association and the Ontario Home Builders' Association, the province has agreed to charge the HST only on the amount of the purchase price over $400,000 and not the entire purchase price.

"This is a much-needed win for builders and homebuyers," said BILD president and CEO Stephen Dupuis. "This is a major amendment."

"It was the right move for the government to make," said Ontario Home Builders' Association president Frank Giannone. "And the lower middle class, who we were worried about, will be protected."

Builders said the problem with the $400,000 threshold is that the market would get skewed around that number and it was also too low a threshold for the Greater Toronto Area, where nearly half of all new homes and condos cost more than that.

Under the original plan, there would have been $30,000 more in provincial taxes added to a $500,000 house; that now will decline to $6,000 (net of input tax credits). Tax payable escalated from $8,000 on a $400,000 home up to $40,000 on a $500,000 home, excluding input tax credits.

"The $6,000 figure is much more reasonable," said Giannone.

He pointed out that a home is often a person's biggest investment and through home ownership, they build a nest egg, which will help fund their retirement, thus lessening the burden on government.

"The provincial government's decision to move to a progressive tax structure . . . is enlightened and responsive," said Dupuis. "The progressive tax structure dramatically reduces the quantum of the tax increase."

Dupuis said while BILD does not oppose harmonization – "it's a good economic and tax policy, which provides business tax relief and eliminates tax on tax pyramiding" and should ultimately offer some cost breaks to builders on things such as building materials – BILD has maintained from the first that housing is different from other consumer products.

The homebuilders' groups still have some issues they will continue to press for reform. One is the HST and renovations, as the new tax is likely to create a flourishing underground economy for handymen operating on a cash basis.

BILD and the OHBA are also asking the federal government to follow the province's lead and move to a progressive GST tax structure in Ontario, as the old system, which has been in place for 10 years, is outdated and does not encourage affordability. The GST will add $25,000 in taxes to a $500,000 home.

For Sale By Owner vs Real Estate Agent

Should you go it alone or get professional help?

Selling a home is more work than you might think, which is why four out of five homes sold annually in Canada are sold through a Real Estate Agent, but there are valid reasons for trying what's known as "For Sale By Owner," or FSBO ("fizzbo"). This page lets you read more about your choices before you decide:




FSBO Could Be For You If:

• The real estate market is favoring sellers at the time you put your house on the market

• You're not in a big hurry to sell

• You want to save the typical MLS Fee of 6% commission that a real estate agent would earn by being involved

• You have a good real estate attorney who can protect you through all the legal facets of selling your home

• You already have a potential buyer who's financially capable of buying your home

• You can detach yourself emotionally from your home

• You have the time and motivation to learn more about the process, answer phone calls and show your house.

FSBO Could Be A Bad Idea If:

• You're in a hurry to sell

• You have a hard time handling tension, complications and rejection

• You don't have the right information to price your home: Overpricing unnecessarily delays a sale, while under pricing forfeits any gains you may have made by avoiding an agent's commission

• You're uncomfortable negotiating

• You unknowingly stumble into legal mine fields because you don't have a real estate attorney on your side.

• The seller sells to save on the commission and the buyer buys FSBO because he feels he can get a better deal because the Seller doesn’t have to pay a commission. Therefore two people can’t save on the same commission and the Seller quite often sells for less than the MLS Realtor would have gotten them


Before we look at the benefits of using a real estate agent, let's take a minute to define the players:

A real estate "agent" is tested and licensed by the state; a "broker" has taken an additional test, and is authorized to operate a private real estate firm; a "REALTOR®" is a licensed professional and a member of the National Association of REALTORS®. Finally, a "listing agent" refers to the real estate agent a seller hires to place a home on the market. For the sake of simplicity, we'll use the term "agent" as a general reference to any of the above.

Benefits Of Using An Agent.

• Agents know the market and can help you determine the right price for your home

• Agents have a vested interest (commission) in selling your home for the highest amount possible

• They have far greater resources than you for locating buyers and steering them to your home, such as the Multiple Listing Service (MLS) and "comp books," which list recent sale prices of homes similar to yours in your neighborhood—the key determiner of your home's worth

• Agents can advertise your home in classified ads and real estate magazines

• They make sure in advance that prospective buyers are financially able to buy your home

• Agents aren't emotionally invested in your home, so they can keep cool, level heads during the negotiating process

• They save you valuable time, working many hours behind the scenes for every hour they're in your presence.

• A seasoned Agent has built up a large data base of clients this could be in the thousands and would benefit the Seller as The Realtor already has a list of leads he can go to.

The home reno tax credit: what you can do

This was going to be a year of hunkering down and putting off fixing up the old homestead, what with economic turmoil gripping not just the country but the entire world.

But since the federal government revealed the Home Renovation Tax Credit in its budget on Jan. 27, 2009, you're starting to think that maybe you might be able to manage a couple of small jobs. After all, if you keep the renovation budget to $10,000, you'll get $1,350 back — a saving of 13.5 per cent.

The tax credit kicks in on expenditures over $1,000, and you won't get any tax relief for what you spend over $10,000. So your tax savings on a $20,000 job will still be $1,350 — or a saving of 6.75 per cent.

The variety of expenditures that qualify for the tax credit is wide. Among them:

Renovating your kitchen, bathroom or basement.
Painting your house.
Installing new carpeting or flooring.
Replacing your heating/air conditioning system.
Upgrading the insulation in your home.Resurfacing your driveway or replacing your lawn with new sod.
Just about any job that improves your home or cottage — or any combination of jobs that improves either or both — qualifies for the credit. Buying furniture, a big-screen TV, cleaning your carpets, buying tools or performing regular maintenance on your home won't get you the tax credit, however.

The Home Renovation Tax Credit can be coupled with other government programs that put money back into your pocket when you renovate your home. For instance, making your home more energy-efficient can qualify you for grants of up to $5,000 under the ecoENERGY Retrofit Program. You will still be able to claim the Home Renovation Tax Credit. The same applies for eligible expenditures that are claimed under the Medical Expense Tax Credit.

While doing the work yourself will give you the most bang for your buck, jobs that you pay a contractor to do also qualify. Expenses such as labour, building permits, equipment rentals, professional services and incidentals are also eligible.

Municipalities regulate building permits, so you should check with your local officials before you begin your job. If your renovation involves structural changes to your home or electrical work, you will most likely need a permit.

One of the major goals of the program, which is expected to cost the government $3 billion, is to stimulate local economies. Most of the material you buy to fix up your home is likely made in Canada and sold at your local hardware store (although it's as likely to be a U.S.-owned big-box store as a Canadian-owned big-box outlet).

Hiring a contractor? Here are some tips

The program will also create work for contractors. It pays to do your homework before you hire a contractor.

Make sure the contractor is licensed: it is your right to ask a prospective contractor to produce their license. If the contractor is reluctant to show it, you should be reluctant to hire him/her.

Get references: any good contractor will gladly supply you with a list of references — and pictures showing examples of work that they have done. That list should include up-to-date contact information including names, addresses, phone numbers, and details about the jobs done.

Get several quotes: they should be in writing and should spell out exactly the work you want done and how long it should take. The lowest quote may not necessarily be the best. If somebody comes in with a price far below the others, it could be due to cutting corners.

Make sure the contractor is insured: ask to see their certificate of insurance. Your contractor should have workers compensation and third-party liability insurance for all the people on the job and damage they may cause ($2 million is standard). If they don't, you could be on the hook if there's an accident.

One tax credit per family

Unlike the Home Buyers' Plan, where each spouse can withdraw up to $25,000 from their RRSP to put toward a down payment on a first house, the Home Renovation Tax Credit is limited to one credit per family.

While you can make claims for work done at more than one residence you own, the maximum any family can get back is $1,350. But a family can share the credit.

You'll be able to claim the credit on your return for the 2009 tax year. All material has to be purchased and work has to be finished no later than Feb. 1, 2010.

Thank you for your business!


Linda Belan
Mortgage Specialist
BMO Bank of Montreal
Phone: 519-344-2443
Cell: 519-384-9237
Fax: 519-344-4488

Email: linda.belan@bmo.com