HST on a house flip?

Question

Hello, we completed our first house flip recently.   We were doing it as our first foray into real estate investing for my husband's carpentry and renovations business.  Did not charge HST on the sale of the house. Does that mean that we do not claim HST on purchases of materials for the renovations?

Roy N. · Answer

@Hannah Westner

While generally GST/HST is only charged on new builds, there is a threshold test on renovated properties.  If the house is "substantially renovated" then the CRA deems it to be effectively new and HST must be charged on the sale.   While the CRA does its best not to precisely quantify "substantially renovated", other builders and accountants have indicated the bar is somewhere between 60-70%.

The good news, like any business, if you collect GST/HST on your sales, you can claim input tax credits.  If you do not collect GST/HST in your business, then you cannot claim credits.    It's a good topic to review with your accountant.

Oren K. · Answer

HST is charged on new construction of a home / condo. Any resale going forward is HST exempt. Unfortunately, the rehab costs are not HST exempt and at the end of the day, it is just the cost of doing business in Canada / Ontario.

It is up to you to roll this cost up to your selling price to meet the profit targets you are looking for.

Chris Habets · Answer

http://www.randyselzer.com/HST-resale-homes-Ontari...

This is a good overview, Hannah. No HST on resale homes is the long and the short of it, though.

Account Closed · Answer

Hi Hannah.  Of course you can.

Hannah Westner · Answer

Thanks everyone!  Very helpful.   I appreciate your feedback.

Yes, @Roy N. this is why I'm looking for a new accountant (as we've discussed elsewhere).  Mine doesn't have a lot of experience with real estate.  I was checking his response here, after I raised the question with him of whether we could claim the ITCs.  In the end, it seems he gave me the right advice but I'd rather have someone who would proactively alert me to these things, rather than the other way around.

Have a great week everyone.

Hannah Westner · Answer

HI Faye, can you elaborate at all?  So, it's OK to claim the HST on the purchases we made to renovate the house?  When do you have to charge HST on the sale of a house?

HST on a house flip?

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