IMMIGRATE

New Canada GST Rebate Effective May 2025 For First-Time Home Buyers

May 31, 2025
8:56 am

Share Now

Last Updated On 31 May 2025, 8:34 AM EDT (Toronto Time)

On May 27, 2025, the government of Canada unveiled a new GST rebate to make homeownership more attainable for young Canadians and stimulate new home construction nationwide.

The First-Time Home Buyers’ GST Rebate (FTHB GST Rebate) eliminates the Goods and Services Tax (GST) on new homes valued up to $1 million for eligible first-time buyers.

It also offers a phased rebate for homes valued between $1 million and $1.5 million.

This measure, expected to deliver $3.9 billion in tax savings over five years starting in 2025-26, could save qualifying buyers up to $50,000, marking a significant step toward addressing housing affordability.

This comprehensive guide explores the details of the FTHB GST Rebate, its eligibility criteria, how it works for different types of home purchases, and its potential to reshape the Canadian housing market.

Whether you’re a young Canadian dreaming of owning your first home, a builder eyeing new opportunities, or simply curious about this policy, this article provides everything you need to know to take advantage of this transformative initiative.

The FTHB GST Rebate is a new tax relief program designed to reduce the financial burden of purchasing or building a new home for first-time buyers in Canada.

By eliminating or reducing the GST (or the federal portion of the Harmonized Sales Tax, HST) on qualifying new houses, the government aims to lower upfront costs and encourage the construction of new housing units across the country.

Key Features of the FTHB GST Rebate

Full GST Exemption: First-time home buyers can receive a 100% rebate on the GST for new houses valued up to $1 million, saving up to $50,000.
Phased Rebate: For homes valued between $1 million and $1.5 million, the rebate is phased out linearly. For example, a $1.25 million home qualifies for a 50% GST rebate, saving up to $25,000.
No Rebate for High-Value Homes: Homes valued at or above $1.5 million are not eligible for the rebate.
Eligibility Period: The rebate applies to agreements signed or construction started on or after May 27, 2025, and before 2031, with homes substantially completed by 2036.
One-Time Benefit: The rebate can only be claimed once per individual, and it is not available if a spouse or common-law partner has previously claimed it.

This initiative complements the existing GST/HST New Housing Rebate but introduces specific conditions to target first-time buyers, making it a tailored solution for those entering the housing market for the first time.

To be eligible for the FTHB GST Rebate, individuals must meet specific criteria that ensure the program benefits genuine first-time home buyers.

Here’s a breakdown of the eligibility requirements:

Definition of a First-Time Home Buyer

To qualify as a first-time home buyer, an individual must:

Be at least 18 years old.
Be a Canadian citizen or permanent resident.
Not have owned a home (in Canada or elsewhere) in the calendar year of the purchase or in the four preceding years, nor have lived in a home owned by their spouse or common-law partner during that period.

Types of Qualifying Purchases

The FTHB GST Rebate applies to three main scenarios:

New Homes Purchased from a Builder: Buying a newly constructed home (including on leased land) from a builder.
Owner-Built Homes: Building a home yourself or hiring someone to build it on land you own or lease.
Cooperative Housing Shares: Purchasing shares in a cooperative housing corporation (co-op) where the co-op paid GST/HST on new housing.

Additional Conditions

The home or co-op unit must be acquired for use as the buyer’s primary place of residence.
The buyer must be the first individual to occupy the home or co-op unit as a residence.
For purchases from a builder or co-op shares, the agreement of purchase and sale must be signed on or after May 27, 2025, and before 2031.
Construction must begin before 2031 and be substantially completed by 2036.

Limitations

To prevent misuse, the government has introduced safeguards:

The rebate is a one-time benefit per individual.
If your spouse or common-law partner has already claimed the rebate, you are ineligible.
The rebate is not available for assignment sales where the original agreement was signed before May 27, 2025, or if an agreement is cancelled and re-entered to bypass this rule.
Co-op housing eligible for the 100% GST rebate for purpose-built rental housing does not qualify for the FTHB GST Rebate.

The FTHB GST Rebate is designed to be straightforward, but its application varies depending on the type of home purchase.

Below, we explore how it works for each qualifying scenario.

1. New Homes Purchased from a Builder

When purchasing a new house from a builder, first-time buyers can recover up to $50,000 of the GST (or federal HST portion) paid. Here’s how it works:

Eligibility: At least one purchaser must be a first-time home buyer, and the home must be their primary residence.
Savings Example:
- For a $800,000 home with 5% GST ($40,000), the full $40,000 is rebated.
- For a $1.25 million home, the GST is $62,500, but the rebate is 50% ($31,250) due to the phase-out.
- For a $1.5 million home, no rebate is available.
Process: Buyers typically apply for the rebate through the Canada Revenue Agency (CRA) after the purchase, though builders may apply the rebate at the point of sale in some cases, reducing the upfront cost.

2. Owner-Built Homes

For those building their own home or hiring a contractor, the rebate covers up to $50,000 of the GST/HST paid on construction costs. Key points:

Eligibility: The owner-builder must be a first-time home buyer, and the home must be their primary residence.
Savings Example: If you spend $50,000 in GST on construction materials and labor for a $1 million home, you can recover the full $50,000. For a $1.3 million home, the rebate is reduced to 60% ($30,000).
Process: You’ll need to document GST/HST paid on construction expenses and apply for the rebate through the CRA.

3. Cooperative Housing Shares

Purchasing a share in a co-op that paid GST/HST on new housing qualifies for the rebate, up to $50,000. Key details:

Eligibility: At least one purchaser of the co-op share must be a first-time home buyer, and the co-op unit must be their primary residence.
Savings Example: If the co-op paid $30,000 in GST on a new unit, the full amount is rebated for a home valued up to $1 million.
Process: Similar to other rebates, you apply through the CRA, providing documentation of the co-op share purchase and GST/HST paid.

The Canadian housing market has become increasingly unaffordable, particularly for young people facing high home prices, rising interest rates, and stagnant wages.

The FTHB GST Rebate addresses these challenges by:

Reducing Upfront Costs: Saving up to $50,000 can significantly lower the down payment barrier, making homeownership more achievable.
Encouraging New Construction: By targeting new homes, the rebate incentivizes builders to increase housing supply, addressing Canadian housing shortage.
Supporting Financial Stability: Lowering the cost of entry into the housing market helps young Canadians build wealth through homeownership, a key driver of long-term financial security.

Economic Impact

The government projects $3.9 billion in tax savings over five years, starting in 2025-26. This injection of savings is expected to:

Stimulate the housing market by increasing demand for new houses.
Create jobs in the construction sector, from builders to suppliers.
Boost local economies as new homeowners invest in their communities.

Applying for the FTHB GST Rebate involves several steps, but the process is designed to be accessible.

Here’s a step-by-step guide:

Confirm Eligibility: Ensure you meet the first-time home buyer criteria and that your home purchase or construction qualifies.
Gather Documentation:
- For purchases from a builder: Agreement of purchase and sale, proof of GST/HST paid, and evidence of primary residence.
- For owner-built homes: Receipts for construction costs, including GST/HST paid, and proof of completion.
- For co-op shares: Purchase agreement for the share and documentation of GST/HST paid by the co-op.
Complete the Application: Use the CRA’s designated rebate application form depending on your situation.
Submit to the CRA: File your application, typically within two years of the home’s purchase or substantial completion.
Receive the Rebate: If approved, the rebate will be issued as a refund or credited against taxes owed.

For the most accurate and up-to-date application details, check the CRA’s website or consult a tax professional.

To make the most of this opportunity, consider the following:

Shop Within the Price Range: Target homes valued at or below $1 million to maximize the rebate. Use the phase-out formula to calculate savings for homes between $1 million and $1.5 million.
Plan Your Timeline: Ensure your purchase agreement or construction start date falls on or after May 27, 2025, to qualify.
Work With Reputable Builders: Choose builders familiar with GST/HST rebates to streamline the process.
Keep Detailed Records: Maintain receipts and contracts to support your rebate application.
Consult a Professional: A real estate lawyer or accountant can help navigate eligibility and application requirements.

While the FTHB GST Rebate is a significant opportunity, there are potential hurdles to be aware of:

Limited Scope: The rebate only applies to new homes, excluding resale properties, which may limit options in some markets.
Price Caps: Homes above $1.5 million are ineligible, which could exclude first-time buyers in high-cost cities like Toronto or Vancouver.
One-Time Use: The lifetime limit means couples must strategize who claims the rebate if they plan multiple home purchases.
Administrative Burden: Applying for the rebate requires detailed documentation, which could be daunting for some buyers.

The FTHB GST Rebate is part of a broader strategy to address the Canadian housing crisis.

By incentivizing new house construction, the government aims to increase housing supply, which could stabilize prices over time.

Additionally, the rebate aligns with other federal and provincial programs, such as the First-Time Home Buyer Incentive and mortgage rule changes, to create a more supportive environment for young buyers.

For Builders and Developers

The rebate is expected to spur demand for new homes, encouraging developers to invest in projects like condominiums, townhouses, and single-family homes.

This could lead to:

Increased construction activity in urban and suburban areas.
Innovation in affordable housing designs to meet the $1 million threshold.
Partnerships between builders and co-ops to offer rebate-eligible housing options.

For Communities

New house construction can revitalize neighborhoods, create jobs, and attract young families to growing regions.

However, local governments must ensure infrastructure, such as schools and transit, keeps pace with development.

To illustrate the impact of the FTHB GST Rebate, here are three hypothetical scenarios:

Emma and Liam’s Condo Purchase:
- Scenario: Emma, a 25-year-old Canadian citizen, and her partner Liam, a permanent resident, buy a new $900,000 condo in Calgary as their first home. They sign the purchase agreement in June 2025.
- Savings: The GST on the condo is $45,000 (5% of $900,000). They receive a full rebate of $45,000, reducing their upfront costs.
- Impact: The savings help them afford a larger down payment, securing a better mortgage rate.
Aisha’s Owner-Built Home:
- Scenario: Aisha, a 30-year-old first-time buyer, hires a contractor to build a $1.1 million home on land she owns in Kelowna. Construction begins in 2026.
- Savings: Aisha pays $55,000 in GST on construction costs. Due to the phase-out, she receives an 80% rebate ($44,000).
- Impact: The rebate offsets material costs, allowing Aisha to invest in energy-efficient upgrades.
Carlos’s Co-op Share:
- Scenario: Carlos, a 28-year-old Canadian citizen, buys a share in a new co-op in Halifax for $800,000 in 2025. The co-op paid $40,000 in GST on the unit.
- Savings: Carlos receives a full $40,000 rebate, as the unit is valued under $1 million.
- Impact: The savings make co-op living affordable, helping Carlos enter the housing market.

The First-Time Home Buyers’ GST Rebate is a bold move by the Canadian government to make homeownership more accessible for young Canadians while boosting the housing market.

By offering up to $50,000 in savings on new homes, this program could be a game-changer for first-time buyers struggling to enter the market.

Whether you’re buying from a builder, constructing your own home, or investing in a co-op, the FTHB GST Rebate offers a unique opportunity to reduce costs and build a brighter future.

To take advantage of this rebate, start planning now. Check your eligibility, explore new house options, and consult with professionals to ensure a smooth application process.

For the latest updates, visit the CRA’s website or follow housing policy news on platforms like X.

Who qualifies for the FTHB GST Rebate?

You must be at least 18, a Canadian citizen or permanent resident, and not have owned a home (or lived in one owned by your spouse/partner) in the current or four prior calendar years. The home must be your primary residence.

What types of homes are eligible for the GST rebate?

The rebate applies to new homes bought from a builder, owner-built homes, or shares in a cooperative housing corporation, with agreements signed or construction started on or after May 27, 2025, and before 2031.

How much can I save with the FTHB GST Rebate?

You can save up to $50,000 on the GST for new houses valued up to $1 million. For homes between $1 million and $1.5 million, the rebate phases out linearly (e.g., 50% at $1.25 million). No rebate applies for homes $1.5 million or above.

Can I claim the GST rebate more than once?

No, the rebate is a one-time benefit per individual. You also cannot claim it if your spouse or common-law partner has already claimed it.

How do I apply for the FTHB GST Rebate?

Submit an application to the Canada Revenue Agency (CRA) with proof of GST/HST paid, purchase agreements, or construction receipts, typically within two years of the home’s purchase or substantial completion.