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

1. Scope of rebate: Total GST waived on homes ≤ $1M; partial waived for $1M–$1.5M; none beyond.
2. Timeline: Only purchase contracts entered May 27, 2025 to before 2031 are eligible.
3. Confirm builder compliance: Ask if the GST rebate is built into the purchase price or needs CRA claim.
4. Documentation matters: Keep proof of first-time status and first occupancy as the CRA may check.
5. 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.