New Residential Rental Property Rebates in Alberta: The Complete Guide

Real estate is a complex topic and can be confusing for many people. That is why a number of people do not provide enough attention to the New Residential Rental Property rebate (NRRP) opportunity.

The paperwork related to the NRRP rebate can be confusing. And you might need assistance and tips to figure out the costs as well.

Any person will be spending a lot of money on their properties. It is a big investment. As a result, that person deserves to get some invested money back. Rebate professionals can help in determining eligibility and begin the claim.

But before reaching out for professional help, you will need to gather some basic ideas about the NRRP rebate.

Rebates can save you a substantial amount of money on your real estate purchases by lowering your overall tax liability. 

There are two federal rebates that Alberta property purchasers can benefit from: the GST/HST New Housing Rebate and the GST/HST New Residential Rental Property Rebate.

Here’s your complete guide to these rebates, as well as to other rebates and incentives which you can claim as a new landlord in Alberta.

What Does a Rebate on New Residential Rental Property Mean?

The NRRP Rebate is for property investors and landlords who rent out newly purchased real estate. It’s a rebate on your harmonized sales tax (HST) that you would have paid at closing, as well as on the Goods and Services Tax (GST) paid at closing.

When you buy a newly constructed or renovated house, you will need to pay the costs. Along with that, your expenses will be subjected to the Goods and Services Tax (GST). These 2 costs can make the overall property buying prices relatively high.

However, there is one good piece of news. Under the GST/HST new residential rental property rebate set by the Canada Revenue Agency (CRA), you can rebate a portion of the GST amount. And this is only possible if you become eligible and file the GST/HST rebate application.

The GST/HST NRRP Rebate is identical to the CRA’s GST/HST New Housing Rebate. According to the clause,  the property must cost less than $450,000.00 before tax.

The new residential rental property rebate calculator uses the same formula (e.g., GST payable times by 36%, up to the value of $6,300.00) to determine the amount.

Tactics for HST Rebate Rental Property

To decide whether a property is a viable investment, the first thing that real state investors usually look at is the capitalization rate, sometimes known as the “cap rate.”

In short, the capitalization rate is measured by deducting property expenses like taxes, maintenance, and insurance from rental revenue. And then, you need to divide that number by the combined worth of the residence.

Here, the objective is to earn the highest net operating revenue (total rent subtracted from the costs) relative to the property’s total value. And in most cases, these cap rates are expressed in percentages.

HST is included in the purchase price of a brand-new apartment or house. While on documents, it lowers the cap rate of the investment condo or house. But a prudent investor will consider the total area of the HST rebate rental property.

This is important for HST rental rebate calculator. You can compare the new and not-so-new properties and find out where GST on residential rental properties in Canada is not included.

Utilizing the rental property HST rebate to lessen the mortgage principal is relatively simple. One of the most popular methods in ensuring HST rebates new condos is using the 10/10, 15/15, or 20/20 to take out a mortgage.

It enables prepayment up to 20% of the initial mortgage principal amount without incurring any further charges or penalties at the end of the tax year.

Using a Credit Card for Down Payment

Another popular option among many investors to prevent having a larger mortgage to meet the whole HST amount is to put a greater down payment with credit cards.

You may simply pay off the credit card debt once you receive the HST rebate on rental property. However, credit cards can have much higher interest rates than mortgages.

In addition, carrying the additional debt this way would cost you more. Yet, this strategy enables you to qualify for a mortgage more easily because you would have a significant down payment. And therefore would not require as large a mortgage.

Requirements to Qualify for the New Residential Rental Property Rebate

First things come first. There are quite a few qualifications to consider for the new residential rental property rebate. Fulfilling these qualifications mean that you are eligible to rent a property in Canada.

Here are 4 essential requirements to qualify for a new residential rental property rebate:

Newly Constructed Home

The first qualification for the rental rebate is the most obvious one. The property you intend to purchase must be a new one.

The construction of the house should be new. However, there are some exceptions. Such as, the house can be newly renovated as well. In addition, it can also be a conversion project for the owner of the house.

First Occupancy

The landlord cannot be among the initial inhabitants of a new residential rental property. This implies you can’t buy a house and live there before renting it out. Thus, it has to be occupied by tenants from the beginning.

The property must be leased to tenants for at least a year as its first use. Tenants must be individuals (rather than a corporation) and use the property solely for residential purposes.

Paying GST/HST

At the time of closing on the new property, you must pay the GST/HST. You are regarded to have made a self-supply first. Then, you must have paid and received taxes on the actual price of the house for the new home.

Lease Agreement

The final qualification is having a lease agreement along with the rebate application. It is a must to fill out the rental property application form properly.

And after that, you will also need a copy of your one-year lease agreement. This agreement must be sent to the CRA as a final step.

Does Alberta Offer a Provincial New Residential Rental Property Rebate?

Alberta only offers federal rebates. 

However, Alberta does offer a few other grants, loans, and programs that may apply to your situation. For example, the Residential Rehabilitation Assistance Program is open to First Nations members owning residential properties that want to create affordable, self-contained rental accommodations such as mother-in-law suites. This offers a forgivable loan of $60,000 per unit. 

Another example would be the CMHC Green Home rebate for buying, building, or renovating energy-efficient homes using CMHC-insured financing. This is a 15% rebate for building a home to Energy Star standards or up to 25% for building them to R-2000 standards. 

Certain Alberta municipalities also offer property tax incentives worth investigating. Ask your real estate lawyer which ones might apply to you. 

We urge our clients to thoroughly investigate every rebate, grant, or forgivable loan that might apply to their unique situation. 

What is the New Housing Rebate?

The New Housing Rebate is offered on the GST paid on new construction or substantially renovated homes. The home must be built for you or for a relationship that may include parents, siblings, children, or other descendants, as well as your spouse, common-law partner, former spouse, or former common-law partner. It must be the primary place of residence for you or one of these individuals. 

As of April 20, 2021, only one owner of the home must use the home as a primary residence. For example, a parent can buy a home for their child and make the child a co-owner of the home. The child can live in the home, and the parent can live elsewhere without losing access to the new housing rebate. 

Who is Eligible for the NRRP Rebate?

To be eligible for the NRRP Rebate, you must:

  • Be a landlord.
  • Purchase a newly constructed or substantially renovated residential rental property or make an addition to a multi-unit rental complex such as an apartment complex.
  • You may purchase a house, a condo, a duplex, a triplex, a fourplex, or an apartment home.
  • You are a builder who had to account for GST/HST under self-supply rules because you sold a residential unit to an individual and then leased them the land.
  • You rented a residential lot or a site in a residential trailer park.
  • The fair market value on the unit was less than $450,000 when the tax was payable on the purchase or self-supply of the property.
  • You intend the property to be a long-term use rental, not an Airbnb or a VRBO.

Be careful. If you claim the NRRP rebate and then turn around and sell the property within one year of its occupation as a place of residence, you will have to repay it. You will also have to repay it if you rent the property out to a relative. 

You cannot claim the NRRP if you are claiming a New Housing Rebate.

Who is Eligible for the New Housing Rebate?

You must buy or build a new construction home, pay GST taxes, and at least one owner of the home must use that home as a primary residence. The home must be purchased either for your use or for use by a relation. 

How to Apply for the HST New Residential Rental Property Rebate?

To apply, fill out Form GST524 on your tax return. If it’s a multi-unit property, you should also fill out Form GST525. 

Each of these forms will ask you to submit relevant documents to support your rebate application. One of these forms will always be the lease agreement issued to your new tenant, and one will always be a copy of the purchase contract. 

Pay close attention to the requirements, or ask your accountant to help you. 

How to Apply for the New Housing Rebate?

Fill out Form GST191 or GST191-WS. You may also need to fill out form RC7191-ON. You will usually have to submit proof of occupancy. You can learn more by going through this CSA guide.

How Do You Calculate the Provincial New Residential Rental Property Rebate Amount?

The NRRP is the amount of GST/HST paid multiplied by 36%, to a maximum of $6,300. 

How Do You Calculate the New Housing Rebate?

Like the NRRP, the GST/HST New Housing Rebate is equal to the amount of tax paid multiplied by 36% to a maximum of $6300. 

When Do You Claim a New Residential Rental Property Rebate?

You claim the NRRP when you file your tax return for the year. The same is true for the New Housing Rebate if that is the one you are eligible for. Remember, you may only claim one, and you may only claim the one that best applies to your situation. 

How Do You Get Your Rebate Refunds?

The rebate factors can impact into your overall tax liability. It may simply lower your taxes due, or it may result in your getting a refund. Either way, you will realize the rebate benefits at tax time. You will not receive a separate, specific rebate check. 

Read Related Resources

FAQ

Have a look at the below queries if you have any confusion in your mind to clear up:

What is the HST Rebate on a Rental Property?

You will need to pay the GST taxes when you pay a mortgage. This makes the overall rental costs go incredibly high. The HST rebate on a rental property enables buyers to get back some of that money upon eligibility.

What is Edmonton New Housing Rebate?

The Edmonton new housing rebate is the portion of the money that the CRA returns to individuals on property investments. It is a particularly calculated amount that goes back to the investor’s pockets once the minimum eligibility is met.

How Much are Rental Rebates in Edmonton?

If you paid the HST on the land acquisition, the rebate is limited to $24,000. And if you did not, it is restricted to $16,080.

Is Residential Rental Income GST Free?

Landowners are not supposed to collect GST or HST on long-term residential rents. Furthermore, landlords are not eligible for input tax credits (ITCs) for any GST/HST to exempt long-term residential rentals.

Who Qualifies for HST Rebate in Edmonton?

To qualify for an HST rebate in Edmonton, you must first purchase a new house or a substantially renovated one. The house should be on at least a year’s lease. And finally, you must use the property for residential purposes.

How is New Home GST Rebate Calculated?

First, the new housing incentive covers 36% of the GST, which all new house buyers in Canada must pay. This refund is worth up to $6,300 and is only available for homes worth less than $350,000.

Need Legal Help from Experienced Real Estate Lawyers?

Do you have questions about which rebates and incentives might apply to you, how to claim them, or whether you are eligible? Reach out to the team here at Edmonton Real Estate Law! Just call +1 866-474-7777 to set up an appointment today.

Conclusion

Getting an HST rebate rental property can be highly beneficial compared to today’s expensive economy. Investing in estate planning can be extremely complex. Thus, the HST rebate is a blessing in disguise for many.

Yet, the HST rental rebate application process can seem complicated for a regular person. You will need to be aware of how much and which way you are paying.

And you must be eligible first to enjoy the rebate benefits. Thus, whether you buy a new house or renovate the existing one, you must always seek professional help to crack the best deals.