First-Time Buyer GST Rebate on New Construction Homes in Ontario
First-Time Buyer GST Rebate on New Construction Homes in Ontario
If you’re a first-time buyer looking at new construction in Ontario, there’s a significant tax rebate that could reduce the effective cost of your home by tens of thousands of dollars.
To understand how it works, you need to know there are actually three different rebates involved in new construction purchases.
1. Ontario HST Rebate (Provincial)
Ontario provides a rebate of up to $24,000 on the provincial portion of HST.
In most new construction contracts, this rebate is assigned directly to the builder, meaning the advertised purchase price already assumes this rebate is applied.
2. Old Federal GST Rebate
There has long been a federal rebate worth up to $6,300, equal to 36% of the GST portion.
However, it phases out once a home exceeds $450,000, which means it rarely applies today because most new homes exceed that price.
3. New First-Time Buyer GST Rebate
The new federal program for first-time buyers significantly expands the rebate.
Under this program:
- Homes up to $1,000,000 receive a 100% rebate of the 5% GST, up to $50,000
- Homes between $1,000,000 and $1,500,000 receive a partial rebate
- Homes above $1,500,000 receive no rebate
How This Interacts With the Ontario $24,000 Rebate
Most builder contracts already assume the $24,000 Ontario rebate is applied.
So on a $1,000,000 new home, the potential total tax relief could look like this:
Federal GST rebate $50,000
Ontario rebate $24,000
Total tax relief $74,000
However, the Ontario rebate typically still goes to the builder, as it does today.
What This Means for Buyers
For new homes under $1M:
- The 5% GST is effectively eliminated
- HST effectively drops from 13% to about 8%
For homes between $1M and $1.5M, the GST rebate gradually phases out.
Example: $500,000 New Construction Home (Ontario)
Assume a builder lists a home for $500,000 HST included.
In almost all builder agreements, that price already assumes the $24,000 Ontario HST rebate is assigned to the builder, which is standard practice.
To determine the true tax breakdown, we first need to add the $24,000 rebate back to the price, because the builder receives that rebate.
Step 1: Add the Ontario rebate back to the price
Effective price including full HST:
$500,000 + $24,000 = $524,000
Now we remove the HST to determine the base price.
Base price before HST:
$524,000 ÷ 1.13 ≈ $463,717
Step 2: Break down the tax components
Base home price $463,717
GST (5%) $23,186
Ontario portion (8%) $37,097
Total with HST $524,000
The builder then receives the $24,000 Ontario rebate, which brings the effective contract price back to $500,000.
Step 3: Apply the First-Time Buyer GST Rebate
Under the new federal program, first-time buyers receive a full rebate of the 5% GST on homes under $1M.
For this home, the GST portion is approximately:
$23,186
In most new construction purchases:
- The buyer assigns the GST rebate to the builder
- The builder claims the rebate from CRA
- The buyer does not pay that GST amount at closing
Step 4: Effective purchase price
Contract price $500,000
GST rebate applied $23,186
Effective purchase price ≈ $476,814
This is typically the amount the buyer effectively pays and finances with their mortgage.
Important Contract Clause
Most builder agreements include wording similar to:
“The purchaser agrees to assign the GST/HST rebate to the builder.”
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If the buyer does not qualify for the rebate, they must repay that amount on closing.
For a $500,000 home, that could mean an unexpected ~$23,000 increase in closing costs.
Bottom Line
For a $500,000 new construction home in Ontario purchased by a qualified first-time buyer:
Contract price: $500,000
GST rebate applied: ≈ $23,186
Effective purchase price financed ≈ $476,814
The buyer usually does not apply for the rebate themselves or front the money — it is handled through the builder at closing.
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