Understanding the GST/HST New Residential Rental Property Rebate

In recent years, the role of investors in Canada’s housing market has become increasingly significant. Statistics Canada reports that in 2020, investors owned approximately 20.2% of properties in Ontario and 31.5% in Nova Scotia (Static Canada). Many of these investors require mortgages to facilitate their purchases, highlighting the importance of understanding the evolving landscape of mortgage financing for residential rental properties.

Traditionally, mortgages have primarily been sought for owner-occupied homes. However, data from chartered banks indicate a shift in this trend. In the third quarter of 2019, 75% of newly extended mortgages were for owner-occupied properties. By the third quarter of 2023, that figure had decreased to 70%.

As the Canadian real estate market continues to attract domestic and international investors due to its robust fundamentals, population growth, and supportive government policies, rental demand is surging. This increase in demand for rental units is contributing to a rise in mortgages for investment properties, which reached 17% of newly extended mortgages in the third quarter of 2023, up from just 13% in 2019.

Navigating the financial implications of buying or renovating a property can be daunting, particularly regarding taxes like the Goods and Services Tax (GST) and Harmonized Sales Tax (HST). In Ontario, new property purchases are subject to a 13% HST, comprised of a 5% federal portion and an 8% provincial portion. This tax can significantly increase the overall cost for property owners. Thankfully, the GST/HST New Residential Rental Property (NRRP) rebate offers potential relief.

The NRRP rebate is designed to assist landlords in recovering a portion of the HST paid on newly constructed or substantially renovated residential rental properties. This rebate can also apply to those who built their rental properties, added to a multi-unit rental complex, or leased land to an individual after selling them a residential unit, under certain conditions.

To qualify for the NRRP rebate, you must meet one of the following criteria:

  • You purchased a newly constructed or substantially renovated rental property.
  • You built a residential rental property yourself.
  • You added to a multi-unit rental complex.
  • You leased land for residential purposes and accounted for GST/HST under self-supply or change-in-use rules.

Additionally, the fair market value of the property must be under $450,000, or $112,500 for residential lots or trailer park sites. The rental unit should be intended for long-term residential use, with a lease agreement of at least one year.

Eligible homeowners can reclaim up to 36% of the federal portion of HST, up to a maximum of $6,300, and up to 75% of the provincial portion, with potential rebates reaching up to $30,000. This rebate can significantly alleviate the financial burden of construction or renovation costs.

It’s important to note that the NRRP rebate is not available to real estate investors seeking the Ontario New Home Rebate, though other provincial rebate options may apply to certain investment properties.

Applying for the GST/HST NRRP rebate involves meeting specific eligibility criteria and preparing detailed documentation. Ensure that your construction, renovation, or property purchase occurred within the past two years to qualify.

While MonsterMortgage.ca does not offer tax advice, our team of experienced mortgage brokers is here to help you stay informed on market changes and secure the best mortgage options to support your investment goals. Our focus is on providing clarity around financing options and helping you make sound mortgage decisions.

For straightforward advice and reliable support every step of the way, reach out to us: https://monstermortgage.ca/contact/   

With experience assisting over 100,000 Canadians, we’re here to help you explore your options, compare rates, and find the mortgage that suits you best.

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