Is the GST/HST New Housing Rebate Taxable or Does It Affect Cost in Canada?

You bought a new home, received the GST/HST new housing rebate, and now wonder how it fits in your tax return. Two questions come up: does the rebate count as income, and does it change the adjusted cost base used to work out a capital gain when you sell?

Those are income tax reporting questions, and the answers depend on how the home is used and held. This article explains what the rebate is and what to gather so an accountant can answer for your situation.

This article covers Canadian federal tax law, which applies in every province.

What the rebate actually is

The rebate is a refund of part of the GST or federal part of HST you paid on a new home. It is a percentage of tax paid, not of price: CRA's guide says to multiply the GST or federal HST paid by 36%, capped at $6,300 at 5% GST or 13%, 14% or 15% HST.

Where total consideration is $350,000 or less, it is the lesser of $6,300 and 36% of that tax. It phases out between $350,000 and $450,000, and at $450,000 or more it is nil.

Income and cost base: why you should confirm

Adjusted cost base is the figure used to work out a capital gain or loss on a sale. Whether the rebate reduces the home's cost, and how it shows up on your return, depends on how the home is used, whether you will claim the principal residence exemption and your particular facts. Do not assume either way.

Ask your accountant three things: how the rebate is reported, what cost figure to record for the home, and what records to keep. Having the amount and date of the rebate and the tax you paid makes that conversation quick.

First-time buyer rebate as a top-up

If you qualified for the first-time home buyers' rebate, it can be claimed in addition to the new housing rebate as a top-up. For total consideration of $1,000,000 or less, it is the lesser of $50,000 and the tax paid, minus any base rebate. Because it is a larger amount, the same income and cost questions should be asked about it.

• The buyer is at least 18 and a Canadian citizen or permanent resident.
• The buyer has not lived in a home they owned as a primary residence in the current calendar year or previous four years.
• A spouse or common-law partner's prior home ownership and earlier first-time buyer rebates count against the buyer.

Repayment and selling soon after

An individual who receives a rebate they were not entitled to must repay it. For an owner-built house, the sale is generally exempt if you are not a builder for GST/HST purposes and claimed no input tax credits, but it may be taxable if you had a primary or secondary intention to sell, and an ineligible rebate must be repaid.

If you plan to sell soon after buying, the intent to use the house as a primary place of residence must be evident at the outset. A change of plans is a reason to see an accountant or lawyer before you list the home.

What to do next

• Collect your statement of adjustments, Form GST190 and proof of the rebate amount and date.
• Keep the worksheet and supporting records for six years.
• If the home was owner-built, keep the original invoices for six years.
• Ask an accountant how the rebate is reported and what cost figure to record for the home.
• Raise any plan to sell, rent or move out before you act.

Frequently asked questions