Introduction

Thinking of buying your first home? The federal Government of Canada (“Government”) has proposed a new GST rebate (the “proposed rebate”) aimed at helping first-time home buyers and boosting housing supply. If passed, this measure could significantly reduce the cost of purchasing newly built homes, potentially saving eligible buyers up to $50,000 in sales taxes. [1]

We have prepared a breakdown of what is being proposed, how it would work, and who could benefit.

Overview of the Proposed GST Relief Measures

As part of the 2025 federal budget, the Government is proposing to eliminate the GST on new homes valued up to $1 million and offer a partial rebate on new homes valued between $1 million and $1.5 million. [2]

Homes priced at $1 million or less would qualify for a full GST rebate. [3] Whereas, homes between $1 million and $1.5 million would qualify for a phased-out rebate. [4] For example, a $1.25 million home could see a 50% rebate, roughly $25,000 in savings. Homes priced above $1.5 million would not be eligible for the rebate. [5]

If passed, the rebate is to take effect for Agreements of Purchase and Sale (“APS”) entered into on or after May 27, 2025. [6]

Who Would Be Eligible?

To qualify for the proposed rebate, a buyer must be [7]:

• A first-time home buyer
• Purchasing a newly built home, building a home, or buying a share in a cooperative housing corporation

A first-time home buyer would need to be [8]:

• At least 18 years old
• A Canadian citizen or a permanent resident of Canada
• Not have lived in a home that you (or your spouse/common-law partner) owned during the calendar year or in the four prior calendar years

Types of Eligible Purchases

1. New Homes Purchased from a Builder
   
   You may be eligible if [9]:

• At least one purchaser is a first-time home buyer
• The home is purchased for use as a primary residence
• The buyer is the first occupant of the home
• The APS is entered into on or after May 27, 2025, and before 2031
• Construction begins before 2031 and is substantially completed before 2036

If all criteria are met, the buyer could recover up to $50,000 of the GST or federal portion of the HST. [10]

2. Owner-Built Homes

For a home you build (or hire someone to build), the proposed rebate would allow you to recover up to $50,000 of the GST or federal portion of the HST paid on construction costs. [11]

To qualify [12]:

• At least one owner-builder must be a first-time home buyer;
• The home must be used as a primary residence; and
• Construction begins on or after May 27, 2025 and before 2031, with substantial completion by 2036.

3. Shares of a Cooperative Housing Corporation

You may also qualify if you buy a share in a cooperative housing corporation where GST/HST was paid on new housing. The rebate would not apply if the cooperative housing corporation already qualified for a 100% GST rebate for purpose-built rental housing. [13]

Eligibility conditions are similar to the above-mentioned [14]:

• The co-op unit must be your primary residence;
• You are a first-time home buyer.

Limitations

To ensure the rebate is used as intended for first-time home buyers, the Government has proposed several limitations [15]:

• The proposed rebate can only be claimed once
• If your spouse or common-law partner has already claimed the rebate, you are not eligible
• The proposed rebate would not apply on APS signed before May 27, 2025, even if you are a first-time home buyer
• If an APS is cancelled and re-signed after May 27, 2025 to meet the cutoff, the rebate would be disallowed
• Investors and non-occupants would not qualify
• The proposed rebate does not apply to rental properties

Need Help Navigating Your First New Home Purchase?

The proposed GST rebate could offer meaningful financial relief to first-time home buyers. While the measure is not yet law, understanding its potential impact and preparing accordingly can be beneficial. If you are considering buying your first home from a builder or building your own home, it is important to speak with an experienced real estate lawyer early in the process to help you assess your eligibility, review your Agreement of Purchase and Sale, and ensure you are positioned to take full advantage of any new incentives.

If you would like more information regarding the purchase of real estate, please contact Real Estate lawyer Paria Rad, Woitzik Polsinelli LLP at 905-668-4486 ext. 230 or paria@durhamlawyer.ca.

This blog was co-authored by summer law student Aranya Sivakumar.

This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique, and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs

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[1] The Government of Canada, “GST Relief for First-Time Home Buyers On New Homes Valued Up to $1.5 Million” (27 May 2025), online: < https://www.canada.ca/en/department-finance/news/2025/05/gst-relief-for-first-time-home-buyers-on-new-homes-valued-up-to-15-million.html >.

[2] Ibid.

[3] Ibid.

[4] Ibid.

[5] Ibid.

[6] Ibid.

[7] Ibid.

[8] Ibid.

[9] The Government of Canada, supra note 1.

[10] Ibid.

[11] Ibid.

[12] Ibid.

[13] Ibid.

[14] Ibid.

[15] The Government of Canada, supra note 1.