Understanding the HST New Residential Rental Rebate: What Does It Really Mean?
When you hear that you don’t need to pay HST, it actually means you pay it upfront and then get a portion back as a rebate.
How much you get back depends on factors like the value of your new unit, the type of rental, and its location. We’ll be focusing on how this works for new Toronto rentals in the province of Ontario.
Federal New Residential Rental Rebate: How Much Can You Get Back?
You can get back up to 1.8% of your unit’s fair market value from the federal rebate, as long as the value is $350,000 or less. Once your property’s value goes over $350,000, the rebate starts to decrease and disappears entirely once the value hits $450,000.
The fair market value is key here. The government uses this value to calculate both the HST payable and the rebate—usually confirmed by a realtor or appraiser, but it could also be determined by them. If your build costs are slightly lower than the market value, you’ll pay more tax upfront and get a smaller rebate, leaving you with less money in your pocket.
Big warning: If your property is valued way more than what you paid, you could end up paying extra HST instead of getting a rebate, so watch out!
Ideally, your build cost should be as close as possible to the finished value.
Provincial New Residential Rental Rebate: More Savings Potential
Here’s some good news: you can get up to 6% back on the provincial portion, with a maximum rebate of $24,000.
Unlike the federal rebate, this one doesn’t disappear if the value of your property is high. The max rebate is available when the property value is $400,000, but to get the best percentage of your costs back, aim to keep your cost and value under $350,000.
Enhanced HST Rebate: Bigger Savings, Stricter Requirements
You might have heard about the Enhanced HST Residential Rebate, where you can get all the HST back from both the federal and Ontario governments.
While it’s possible, it’s tougher to qualify. You need to have at least four private apartment units or ten private rooms/suites, and 90% of the units must be designated for long-term rental.
Steps to Claim Your HST New Residential Rental Rebate
- To get these rebates, the first step is to rent out the new unit.
- Then, fill out two forms: GST524 and RC7524. If you don’t have an HST number, don’t worry—the CRA will create one with your application. It doesn’t matter if the owner is an individual or a corporation; you can get the rebate in both cases.
- Attach your rental lease agreement to your application and mail it out (unfortunately, online applications aren’t available yet).
- As of summer 2024, it takes about
- Six weeks for the CRA to acknowledge your application
- Six weeks for processing
- If you get audited, it might take a few more months to get everything sorted out before you get issued your rebate
Is It Worth Creating More Rental Units?
The big question: Is it really worth creating more rental units? The short answer is yes.
Converting a single-family home into multiple rental units can significantly boost your rental income and cash flow. Even without the rebate, it’s a smart move that can help you qualify for more mortgages if you want to grow your portfolio.
With the rebate, your costs go down, meaning more profit for you. You might need a bigger construction budget to meet the rebate requirements, but it’s worth it:
- Having five or more units opens up better financing options with the CMHC MLI Select commercial mortgage, offering better rates and terms that can improve your return on investment.
- You can also qualify for a bigger HST rebate, which makes a substantial difference for more units. For example, if you qualify for the full 13% HST rebate on five units, each worth $350,000, you could get an extra $18,200 back per unit, totalling $91,000 for all five units.
How We Can Help
Thinking about investing in a multiplex for rentals? We’re here to make it easy for you. Whether you’re buying or building, we’ll help you through every step, from finding the right property to securing rebates and ensuring your investment pays off.
Our Toronto real estate brokerage specializes in buying and selling investment properties across the city, especially houses and multiplexes. Whether you’re eyeing turnkey multiplexes or considering converting single-family homes to multiplexes, we’ll guide you towards smart real estate investing in Toronto.
Here’s what it’s like to start as a client with us:
- Initial Consultation: We’ll talk with you to understand your needs and teach you how to invest wisely in Toronto real estate.
- Market Search: We’ll search the market to find the perfect property for you.
- Renovation Support: If the property needs renovations, our trusted contractors are ready to help, and we’ll coach you as you manage the project.
- Leasing and Management: If you need help renting out and managing your property, our leasing and management team is here for you.
Ready to get started? Click on the link below, and let’s start working together!
What Toronto Real Estate Investment Is Right For You?
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