A pre-construction home

How Much HST Do You Pay For Pre-Construction Homes?

As buying pre-construction condos and houses becomes a norm, you might have thought – what’s the hook? One of them is HST payment. In Ontario, when you buy a resale property, you don’t pay HST but for pre-construction, since it is a brand new property, you are required to pay the taxes. We hope this blog helps you understand the minute details and make the right buying decision. 

So, how much HST do I pay? 

In Ontario, you pay a combination of HST – 8% is provincial tax and 5% is federal tax, bringing the total to 13%. Most builders include the HST in their selling price, but it is a little complex since the government is involved. 

Builders often include both the HST and any applicable HST rebate in their initial pricing. So, if you’re looking at a new condo advertised for $500,000, this figure already covers the total cost, incorporating the HST and the rebate. 

rebate written on wooden blocks

Hold on, there’s good news for you… 

If you are the end user, meaning you will move into the unit at possession, the builder will offer you a reduced purchase price. You also are eligible for $24,000 in rebates when filing taxes through the New Housing Rebate. 

Let’s understand this with an example. 

Let’s say you purchase a newly constructed condo in Ontario for $400,000. The HST in Ontario is 13%, making the HST on this purchase $52,000, bringing the total cost to $452,000. As a primary resident of the property, you will receive $24,000 in refunds. This means you can recover that portion of the HST paid, effectively reducing the total cost of your condo to $428,000 ($452,000 – $24,000). 

However, there are some conditions. The unit must be occupied for a minimum of 12 months to receive this rebate. End user can be you, any member of your family, or relatives. Now, as the end user, if you sell the new construction property within 12 months of possession, you will still have to pay the HST. Lastly, if you have a co-signer on the purchase agreement who isn’t a family member or relative, you are no more eligible for the rebate.  

If you are an investor, you’ll have to pay 7.8% HST on units under $350,000 and $24,000 maximum on pre-construction properties above $450,000. This amount is due at closing. This amount can be claimed as business expenses when you file taxes. Other than that, you can also apply for the New Residential Rental Property Rebate. 

tax rebate(wooden cut outs) on a blue carpet

How do I qualify for a New Residential Rental Property Rebate? 

To qualify for the HST rebate via the New Residential Rental Property Rebate (NRRPR), you’re required to rent the property for a minimum of 12 months after closing. The rebate amount is deposited in your account within 2-3 months. This rebate can only be applied within two years of closing, after which you are eligible for it. 

Should you, the investor-owner, decide to sell the property within this 12-month timeframe, you forfeit eligibility for the HST rebate. If within that time frame you have been given a refund, you will have to refund the money to the government. 

Documents that you need to submit to the CRA include: 

  • Agreement of Purchase and Sale
  • Final Closing Statement of Adjustments
  • Lease Agreement with the first tenant
  • Land Transfer Tax Statements
  • GST/HST New Residential Rental Property Rebate Application

GST/HST payment is different from land transfer tax and property tax. Neither the end user nor an investor receive rebate through any programs for both of them. However, as an investor you can add the other two taxes as business expenses and receive credit towards your business tax. 

Our team at That Pre-Construction Guy is happy to answer more questions about HST rebates for new construction homes. Get in touch with us today.

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