The federal government has introduced a new GST/HST rebate aimed at improving housing affordability for first-time home buyers purchasing newly constructed homes. The legislation received Royal Assent in March 2026 and allows qualifying buyers to recover some or all of the federal GST (or the federal portion of HST) paid on a new home.

For some buyers, the rebate could mean tax savings of up to $50,000. However, how and when the rebate is received will depend in part on the terms of the purchase agreement and the builder’s approach to the new rules.

Below is an overview of how the rebate works and some practical considerations for buyers of newly built homes.

How the New Rebate Works

The new program allows qualifying first-time home buyers to recover the federal portion of GST or HST paid on the purchase of a newly constructed home.

The amount of the rebate depends on the purchase price:

• Homes valued up to $1,000,000 – Buyers may receive a rebate equal to 100% of the federal GST, up to a maximum of $50,000.
• Homes valued between $1,000,000 and $1,500,000 – The rebate is gradually reduced as the purchase price increases.
• Homes valued above $1,500,000 – No rebate is available.

Example: Home under $1 million

A buyer purchases a newly constructed home for $900,000.

GST at 5% would normally be $45,000. Under the new program, the buyer may recover the full amount, effectively eliminating the federal GST.

Example: Home between $1 million and $1.5 million

A buyer purchases a new home for $1,250,000.

The maximum rebate of $50,000 is gradually reduced at this price point. The buyer would receive approximately $25,000, meaning a portion of the GST remains payable.

Who Qualifies for the Rebate

To qualify for the new rebate, purchasers generally must meet several conditions:

1. The purchaser must be a first-time home buyer. A purchaser is considered a first-time home buyer if they have not lived in a home that they, or their spouse or common-law partner, owned or jointly owned, anywhere in the world, as their primary residence at any time in the calendar year of purchase or in the preceding four calendar years.
2. The home must be newly constructed or substantially renovated.
3. The buyer must intend to use the home as their primary residence.
4. The purchase must be from a builder.

The rebate applies to qualifying purchase agreements entered into after March 19, 2025 and before 2031. In addition, the construction (or substantial renovation) of the home must begin before 2031 and be substantially completed before 2036.

Because the rebate is tied to first-time buyer status, purchasers may be required to provide declarations confirming their eligibility as part of the transaction.

How the Rebate Is Claimed

There are two ways the rebate may be received.

Builder credits the rebate at closing

In many new-build transactions, the builder credits the rebate directly to the purchaser at closing. In this case:

• The builder reduces the GST/HST payable by the amount of the rebate.
• The builder then applies to the Canada Revenue Agency to recover that amount.

This approach allows the buyer to receive the benefit immediately at closing.

Buyer applies to the CRA after closing

If the builder does not credit the rebate at closing, the buyer may instead apply directly to the CRA after the purchase is completed.

This means the buyer must:

1. Pay the full GST/HST amount on closing, and
2. Submit the rebate application afterward to recover the amount.

What Happens if You Already Signed a Purchase Agreement?

One practical issue that is emerging involves buyers who signed agreements with builders before the rebate legislation was finalized.

Many builders are taking the position that these buyers will need to apply directly to the CRA for the rebate after closing, rather than receiving the rebate as a credit from the builder.

This approach is often based on how the original purchase agreement was drafted.

Why the Purchase Agreement Matters

The treatment of the rebate often depends on the GST/HST provisions in the agreement of purchase and sale.

Many builder agreements include clauses stating that:

• The purchase price assumes the buyer will qualify for applicable rebates; or
• The buyer must assign the rebate to the builder.

If the agreement requires the buyer to assign the rebate, the builder may be responsible for claiming it. If the agreement does not address the new rebate, the buyer may need to claim it directly from the CRA.

Because builder agreements vary widely, buyers should review these provisions carefully before closing.

Practical Tips for Buyers

Buyers purchasing newly constructed homes should consider the following steps:

1 – Confirm how the rebate will be handled
Ask whether the builder will credit the rebate at closing or whether you will need to apply for it afterward.

2 – Review the GST/HST clause in the agreement
The wording in the agreement often determines how rebates are applied.

3 – Plan for closing costs
If the rebate will not be credited at closing, buyers should be prepared to cover the GST amount temporarily until the rebate is processed.

4 – Keep documentation
CRA applications typically require documentation confirming eligibility and details of the purchase transaction.

Final Thoughts

The new GST/HST rebate represents a significant benefit for qualifying first-time home buyers purchasing newly constructed homes. In some cases, it can eliminate up to $50,000 in federal tax on a new home purchase.

However, buyers who have already signed agreements with builders may find that the mechanics of receiving the rebate depend on the terms of their contract and the builder’s approach to the new rules.

Buyers of new homes should review their purchase agreements carefully and understand how the rebate will be handled as part of their closing.

Michael Abrams

Michael Abrams
Certified as a specialist in Real Estate by the Law Society of Ontario