Posted 20 July 2015 by PackagedLaw.com in category Real Estate. General
When selling a home there are various costs which must be paid. From lawyer fees to governmental taxes. The taxes owing may very well depend on the home sellers specific position.
There are also taxes when buying a home although these taxes in the homebuying and selling process are often different. Even though the taxes can often be considered two sides of the same coin.
When Selling a Home taxes Include:
- Tax on real estate lawyer fees
- Tax on real estate agent commissions
- Capital gain taxes on disposition
- Sales Tax on new homes
Taxes on Real Estate Lawyers’ Fees
While usually minor, this tax is often overlooked. In Ontario, all goods and services are subject to sales tax. This includes the services provided by your real estate lawyer. The real estate lawyer is required to collect harmonized sales tax, which is currently 13% on the services provided.
Taxes on Real Estate Agent Commission
Real estate agents provide a valuable service in facilitating the sale, and purchase of your home. Similar to real estate lawyers, HST must also be paid on this service. As a seller is often paying both the listing real estate agent and the buyers’ real estate agent, the seller of a home is responsible for paying the sales taxes on these commissions. In most instances the real estate lawyer will forward the taxes owing as part of the real estate commission directly to the listing brokerage. The listing brokerage will then distribute the real estate commission and taxes accordingly.
Capital Gain Taxes When
If a profit is made on selling real estate, it may require that taxes be paid to the Canada Revenue Agency. Capital gain taxes are owing on any investment gain. It is important to note that capital gain taxes are usually taxed at a lower level than ordinary income.
In Ontario there is currently a primary residence exemption on capital gains taxes on the sale of a home. This exemption means that no taxes may be owing to the CRA relating to any gain in value of a property while it met the definition of a primary residence of the home seller.
Sales Tax on New Homes
Is the responsibility of the buyer. Yet, this may affect a seller of a new home, if they have purchased a new home, and claimed a rebate which they are no longer eligible for.
For example, where a new home or substantially renovated home is purchased, the sales tax rebate may already be included in the purchase price, with an assignement by the buyer to the seller. Such rebates usually require that the buyer move intot eh house within a set period of time, for it to be eligible for this rebate. Accordinlgy if a now home seller, had made certain representation when buying the home, it is important to ensure that they are still eligible for the rebate claimed and assigned.
It is important to note that this instance usually arises when there is a purchase or sale of an assignment of a property.
Land Transfer Tax
Land transfer taxes are the responsibility of the homebuyer. Accordingly there are no land transfer taxes when selling a home.