June 24, 2025
In a bold move to break barriers to homeownership amongst Canada’s affordability crisis, the federal government has announced a GST relief package for first-time homebuyers. This relief provides a better opportunity for young Canadians to achieve their dreams of owning their first home. Finance Minister François-Philippe Champagne announced this measure on May 27, 2025, which is expected to save individuals up to $50,000 in taxes as they enter into the housing market for the first time [See: GST relief for first-time home buyers on new homes valued up to $1.5 million].
Previous GST/HST New Housing Rebate
Under the previous GST/HST New Housing Rebate, homeowners could have recovered a portion of the federal sales tax, whether it is the GST or the federal portion of the HST on a new or substantially renovated home. The home must have been the primary place of residence and fall between certain pricing thresholds [See: GST/HST new housing rebate].
The previous rebates apply to HST in provinces like Ontario, where the federal portion of the HST was considered for rebate. For new or substantially renovated homes worth up to $450,000 before GST, a partial rebate was available. For new homes priced below $350,000 before tax, homeowners were able to obtain a maximum rebate of 36% of the GST paid. The rebate is gradually phased out for homes priced between $350,000 and $450,000. If a new home was worth more than $450,000, the homebuyer would not be eligible for any rebate.
There were also rebates available from the provincial government for the provincial portion of HST with different rules and thresholds varying from province to province. Ontario offered homeowners a provincial rebate for new homes priced up to $350,000. A reduced rebate was available for new homes in Ontario priced up to $450,000.
The previous rebates applied to GST in provinces without HST with the same price thresholds mentioned above.
In today’s housing market, the low price cap of $450,000 made the rebate less accessible, especially in major cities with soaring house prices. This was an obstacle that the new First Time Home Buyers’ GST Rebate seeks to overcome.
The New GST Relief on New Homes
The new GST relief package is centred on the First-Time Home Buyers’ GST Rebate. This initiative allows for the complete removal of GST on new homes valued up to $1 million for eligible first-time buyers. Qualified homebuyers who purchase a new home between the prices of $1 million and $1.5 million are eligible for partial rebates. New homes above the price of $1.5 million are excluded from the rebate. Canadians are expected to save $3.9 billion over the next five years through this policy. This policy is designed to lower upfront costs of new homes and encourage the construction of new housing across Canada. [See: GST relief for first-time home buyers on new homes valued up to $1.5 million].
First-Time Home Buyer Eligibility
To qualify as a first-time home buyer:
Individuals must:
Types of Eligible Homes
The First Time Home Buyer GST Rebate covers homebuyers buying from a developer, building their own homes, or investing in a co-op share. There are certain criteria that must be met for each type of home.
If a homeowner buys a new home from a builder and uses it as their primary residence, they may be eligible to claim the rebate. The purchase agreement must be signed between May 27, 2025, and 2031. The construction of the new home must begin before 2031 and must be substantially complete before 2036.
If a homeowner chooses to build their own home, they would also be eligible for the GST paid on construction costs. The construction of their home must begin after May 27, 2025, and before 2031. The home must be substantially completed by 2036. The owner or the builder must be the first occupier of the home.
If a share is purchased in co-operative housing, the right to occupy a unit as primary residence is obtained. The purchase of the share must occur on or after May 27, 2025, and before 2031. The construction of the co-operative housing must begin before 2031 and be completed by 2036.
Limitations
There are restrictions that apply to ensure that the GST rebate benefits first time homebuyers. The rebate can only be claimed once in a lifetime. If your spouse or partner has claimed the rebate, you cannot claim it. If the original purchase agreement of a new home was signed before May 27, 2025, the rebate is not available even if the date changes after modification or assignment.
Challenges Surrounding the New GST Rebate
While the new First-Time Home Buyers’ GST Rebate is a major win for many, there is a frustrating catch for some future homeowners. The rebate would not apply if a qualifying individual signed a purchase agreement before May 27, 2025, even if they did so after the federal government publicly announced its intention to eliminate GST for first-time buyers back on March 20, 2025. Therefore, if a potential homebuyer rushed to buy a newly constructed home in good faith, expecting the rebate to apply based on the government’s own words, they would still not qualify for the rebate. That is a big disappointment for new homebuyers especially considering that the rebate can mean up to $50,000 in savings.
There is also some uncertainty about how the Canada Revenue Agency (CRA) will interpret whether a new agreement was made “primarily for bona fide purposes” and not just to qualify for the rebate. For example, if a buyer upgraded to a two-bedroom condo to accommodate a growing family, that seems like a legitimate reason but how CRA will judge these situations remains to be seen.
On top of that, it is unclear whether provinces that charge HST — like Ontario, Nova Scotia, and Prince Edward Island — will follow the federal government’s lead and waive the provincial portion of the tax for first-time buyers. If the provinces do not, the frustration for buyers who just missed the federal cutoff could grow even more.
For builders, this rebate adds another layer of responsibility. As is common practice with the previousNew Housing Rebate, many will choose to apply the GST rebate directly at the point of sale. But with the new rules, they’ll need to be extra careful. If it turns out that the buyer does not qualify, the builder could be liable to repay the rebate amount. To avoid this, builders must begin updating their processes now, which includes gathering clear declarations from buyers to confirm they meet the rebate’s criteria. [See: Tax Insights: GST relief for first-time home buyers on new homes valued at up to $1.5 million]
Conclusion
Younger generations fear the increasing housing prices in major cities and the GST relief could provide some reassurance to first-time homebuyers. Just because one is starting out their journey in the housing market, homeownership should not be out of reach. While empowering first-time homebuyers, this initiative has the capacity to stimulate growth in the construction sector causing an increase in housing supply. While the existing GST/HST New Housing Rebate remains in place for homes under $450,000, it has become less effective in today’s housing market. The new GST rebate helps fill that gap. For those who qualify, the rebate offers meaningful savings of up to $50,000, and both buyers and builders should prepare now to ensure they meet all eligibility criteria. Ultimately, the GST relief could bring many aspiring homeowners one step closer to holding the keys to their first home.
At Bradshaw and Mancherjee, we have Toronto real estate lawyers who have the expertise to help first-time buyers navigate the legal, tax, and contractual details of new home purchases with confidence. Contact us today to make sure you don’t miss out on this rebate opportunity!
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