HST Rebate

Who is entitled to the HST rebate?

Anyone in Ontario who purchases a new home or condo unit from a builder, or who hires a builder to construct a new house is entitled to the HST Rebate program. The program allows new homebuyers to claim a significant portion of the HST in a rebate form in an effort to help them deal with the increased cost of buying a new home. Under certain circumstances, even homeowners who are drastically renovating their property are eligible for the rebate.

If you have done any of the below, you may be eligible for an HST rebate:

Purchased a newly constructed residence that’s never been lived in
Purchased a pre-construction condo or house, being an end-user or even an investor
Renovated your home (only head-to-toe transformations that impact every home in the house are considered eligible, kitchen or basement renovations don’t apply here)
Built a new house yourself
Contracted someone to build a home
Added a major addition to a home
Rebuilt a home that was destroyed in a fire
Bought shares in a newly constructed cooperative housing project
Converted a non-residential building into a home

End-User vs. Investor

The Ontario HST rebate is usually allocated to the builder upon closing when acquiring a new house or condo for yourself or a family member. The builder will utilize this rebate to reduce the project’s purchase price by the amount of the rebate. This allows the housebuilder or condo developer to promote a reduced which boosts sales and makes it easier for a buyer to qualify for a mortgage large enough to cover the property’s costs. Every pre-construction project sold in the GTA has an HST rebate for the majority of developers.

When purchasing a new home to live in (for yourself or a family member) the HST rebate is frequent. HST rebate differs depending on whether you plan on actually living in the new home yourself (end-user) or if you’re an investor who wants to lease the residence immediately after closing as a rental property.

End-User

If you plan on moving in and living in the new property, you must apply for the New Home Rebate (NHR). Under an NHR, you’ll receive the HST rebate based on the fact that you (or a direct blood relative) will occupy the new property as the principal residence for at least the first year.

People qualified as “direct blood relative” i.e., allowed to receive the new home rebate:

Spouses or Common-Law Partners
Children
Parents
Siblings
Grandparents

People unqualified as “direct blood relative”:

Aunts
Uncles
Cousins
Nephews
Nieces
Friends
Business Associates

In the majority of cases, particularly when buying a pre-construction condo in the Greater Toronto Area (GTA), you’ll receive the HST rebate right away in the form of a discounted purchase price. Most condo and home developers already factor the HST rebate into their price lists.

If the new property is sold before the initial one-year window, the Canada Revenue Agency (CRA) will require you to pay back the HST rebate in full, which can add up to as much as $30,000.

Things to Remember

The new homebuyer must occupy the new home as their principal residence for at least the first 12 months after closing.
If the property is sold in the first year, the buyer will be required to pay the HST rebate back in full
Only the new homebuyer or a direct blood relative can occupy the new property as their principal residence.
All co-signers are required to live in the new home as a primary residence in order for the HST rebate to be viable
It’s critical to take all the steps in claiming the new home as your principal residence, including changing your driver’s license address
You can apply for the HST rebate up to a maximum of two years after closing. After those two years pass, you’re no longer eligible to apply for the rebate
Typically, the HST rebate is already factored in pre-construction condo price-lists

Investor

You’re eligible to receive the HST rebate on a new home, irrespective of whether you’re a Canadian or foreign investor. However, if you are an investor you must apply under the New Residential Rental Property Rebate (NRRPR).

To receive the HST rebate through an NRRPR, you must provide a one-year lease agreement in order to prove that the new home will be rented to a tenant for at least the first 12 months after closing.

The new home must be leased for at least the first year before it’s sold. If the investor flips the property before the one-year window closed, the HST rebate is no longer viable and the taxes must be paid in full.

Unlike an NH3, investors who file for NRRPR must pay the entire HST upfront and will receive the rebate around two or three months after proof of the lease agreement has been submitted.

Things to Remember:

Investors must provide a one-year lease agreement and rent the new home for at least the first 12 months
If the new home is flipped within the first 12 months, the HST must be paid in full
Under and HRRPR, investors must pay the HST in full at the time of the purchase and only receive the rebate two or three months after the lease agreement is submitted. Therefore, investors must have more cash on hand at the initial time of purchase
Investors who plan on leasing the unit can’t apply for the HST rebate through an NHR and must file for an NRRPR
You can apply for the HST rebate up to a maximum of two years after closing. After those two years pass, you’re no longer eligible to apply for the rebate
Typically, the HST rebate is already factored in pre-construction condo price-lists

How much is the HST REBATE?

The HST rebate amount varies depending on the new home’s price tag. It is crucial to understand that the rebate doesn’t offset all the HST costs on a new home. If the new house or condo is priced using $350,000, you’re eligible to receive a maximum of $30,000 back. Between $350,000 and $450,000 a sliding scale applied. And for properties costing more than $450,000, a maximum rebate of $24,000 can be received. If a pre-construction condo is priced at $500,000 the HST would equal $65,000. After factoring in the rebate, you’d pay a total of only $41,000 – a savings of $24,000.

Possible Risks Involved

If you applied for the HST rebate as a principal residence, it’s critical to take the steps that prove on record that you are actually living in the new home day-in and day-out. Make sure to change your address with the CRA as well as on all government issues IDs, such as your driver’s license and health card.

For investors who plan on leasing a new home, it’s critical not to claim the rebate as a principal residence and instead apply as the landlord through the New Residential Rental Property Rebate (NRRPP).