GST Exemption for First-Time Home Buyers in Canada (2025 Update)

Introduction

In a major affordability boost, the Canadian federal government announced on May 27, 2025 a sweeping GST rebate that effectively eliminates the 5% federal GST on the purchase of new homes priced up to $1 million for eligible first-time home buyers. This is not just a partial refund - it’s a full exemption of GST up front for most first-time buyers on new construction.

What Is the New FTHB GST Rebate?

Full 5% GST exemption on new homes valued at $1 million or less (savings of up to $50,000).
Partial exemption for homes valued between $1 million and $1.5 million - rebate phases out linearly so a home at $1.25 million would qualify for about a 50% rebate (roughly $25,000).
No rebate on homes valued at or above $1.5 million.

Who Qualifies?

To be eligible, buyers must meet common-sense criteria:

Be 18 or older, a Canadian citizen or permanent resident.
Have never owned a home - in Canada or abroad - in the current year or the four previous years (including through your spouse/common‑law partner).
Use the home as your primary residence and be the first occupant after its completion
The purchase agreement must be signed on or after May 27, 2025 and before 2031, with construction beginning before 2031 and completing by 2036.
You can claim the rebate only once in your lifetime, and it’s denied if your spouse/partner has already claimed it.

Eligible property types include new homes purchased from a builder, owner‑built homes, and co‑op housing shares where first occupancy is intended.

How Much Could You Save?

Home Price Zone	GST Paid (5%)	Rebate Eligibility	Net GST Cost
Up to $1 million	≈ $50,000	100% rebate (up to $50,000)	$0
$1M – $1.5M	$50K–$75K	Sliding scale rebate	Partial cost
$1.5 million or more	≥ $75,000	No rebate	Full GST

A $1 million home carries $50k GST - fully rebated.
A $1.25 million home carries $62,500 GST - rebated 50% ($31,250).
At $1.5 million or more, no rebate is available.

How It Works

Builder‑applied: Many builders will apply the rebate at closing, reducing your upfront GST cost.
CRA application: If it’s not applied by the builder (or you're owner‑building), you must submit a rebate claim to the CRA.
This new FTHB GST Rebate works in addition to the existing GST/HST New Housing Rebate, where applicable.

Why This Matters

This measure immediately lowers the upfront cost of buying a new home by up to $50k.
It's designed to assist first-time buyers and stimulate new construction, aligning with broader federal housing goals.
Unlike previous programs with much lower thresholds (like $350k or $450k), this rebate reflects current housing prices and market realities.

Key Takeaways & Action Steps

Scope of rebate: Total GST waived on homes ≤ $1M; partial waived for $1M–$1.5M; none beyond.
Timeline: Only purchase contracts entered May 27, 2025 to before 2031 are eligible.
Confirm builder compliance: Ask if the GST rebate is built into the purchase price or needs CRA claim.
Documentation matters: Keep proof of first-time status and first occupancy as the CRA may check.
Professional support: Consult a real estate lawyer or tax advisor to preserve eligibility-especially if restructuring agreements or assignments.

Final Word

Yes, beginning May 27, 2025, qualified first-time buyers purchasing a new home in Canada priced up to $1 million get 100% of the federal GST exempted. Homes priced between $1 million and $1.5 million receive a prorated rebate. This is a game‑changer for affordability - and it’s time-sensitive.

Search This Blog