HST on Real Estate Transactions in Ontario: New Homes, Rentals, and Resales

Buying or selling property in Ontario comes with a lot of moving parts — and HST on real estate Ontario transactions is one that catches many people off guard. The rules are not uniform: whether you pay HST depends heavily on the type of property, how it has been used, and what you plan to do with it. Getting this wrong can mean an unexpected tax bill of tens of thousands of dollars, or a missed rebate you were entitled to claim.

This guide walks through the most common scenarios in plain language. It is not a substitute for professional advice, but it will help you ask the right questions before you sign anything.

The General Rule: Resale Homes Are Exempt, New Builds Are Not

The most important distinction in Ontario real estate and HST is between used residential property and newly constructed property.

When you purchase a previously owned home that has been lived in, the sale is generally exempt from HST. The buyer pays land transfer tax and legal fees, but HST is not added to the purchase price. This is the situation most people are familiar with.

When you purchase a newly built home, condominium, or substantially renovated property, HST applies to the purchase price. The current HST rate in Ontario is made up of a federal portion and a provincial portion — confirm the current combined rate with the Canada Revenue Agency (CRA) or your accountant, as rates can change.

Practical tip: When a builder quotes you a price, always ask whether HST is included in that number or added on top. The answer makes a significant difference to your budget.

The New Housing HST Rebate

Because HST on a new build can be substantial, the federal government and Ontario offer partial rebates for qualifying buyers. The New Housing HST Rebate is designed to reduce the HST burden on new homes up to a certain purchase price threshold.

The rebate has two components — a federal portion and an Ontario portion — and each has its own eligibility rules and phase-out thresholds. As of the time of writing, there are price limits above which the rebate reduces or disappears entirely. You should verify the current thresholds directly with the CRA or an accountant before relying on them in your budget.

To qualify, you generally need to be purchasing the home as your primary place of residence (or for a close family member's primary residence). Investors buying new condos as rental properties face different rules — see the rental rebate discussion below.

Builders often offer to credit the rebate to the buyer at closing, provided the buyer qualifies. If you don't qualify (for example, because the home is above the threshold or will be rented), you may owe that rebate back — make sure your purchase agreement is clear on this point.

Assignment Sales and HST

An assignment sale happens when the original buyer of a pre-construction unit (the "assignor") sells their rights under the purchase agreement to a new buyer (the "assignee") before the unit is built and transferred.

HST can apply to assignment sales, and the rules here are technical. In many cases, the profit made on an assignment is subject to HST — particularly where the assignor entered the agreement with an intention to resell rather than to live in the home. The CRA has taken an increasingly close look at assignment sales in recent years.

If you are selling or purchasing an assignment, speak with a lawyer and tax advisor before closing. The assignment agreement itself needs to address who is responsible for any HST owing, and that allocation can be negotiated.

Converting Residential Property to a Rental or Commercial Use

When you change the use of a property you already own — for example, converting your former principal residence into a long-term rental — the Excise Tax Act (ETA) may deem you to have made a taxable supply of the property at fair market value at the time of conversion. This is called a "change in use" and can trigger an HST self-assessment obligation even though no actual sale took place.

The rules here depend on whether the rental is residential or commercial, the extent of the change in use, and whether you were registered for HST at the time. A tax lawyer or accountant can help you determine whether a self-assessment is required and whether any input tax credits are available.

Short-Term Rentals (Airbnb-Type Platforms) and HST

If you rent out a property — or even a room — on a short-term basis (typically less than one month per booking), the rental income is treated differently from long-term residential leases under the ETA.

Short-term rentals are generally taxable supplies, which means HST applies to the rent charged. If your total taxable revenues from short-term rentals exceed the small supplier threshold in a calendar year (confirm the current threshold with the CRA), you are required to register for HST and collect and remit HST on your short-term rental income.

Many short-term rental platforms now collect and remit HST on behalf of hosts in some circumstances — but you remain responsible for understanding your own obligations. Unregistered hosts who exceed the threshold and fail to collect HST can face assessments for the unremitted tax, plus interest and penalties.

Commercial Property Sales and the HST Election

Sales of commercial real estate are generally subject to HST. However, where both the buyer and the seller are HST registrants and the property is being sold as part of a going concern, the parties may be able to jointly elect under the ETA to have the sale treated as a non-taxable transaction. This can avoid a large HST outlay at closing that would otherwise need to be financed and later recovered through input tax credits.

The election has specific requirements — both parties must be registrants, the election must be filed on time, and the sale must qualify. If the conditions are not met, the seller may be liable for HST that was never collected.

Practical Tips for Buyers

• Always ask whether HST is included in the purchase price — especially on new builds, assignment purchases, or commercial properties.
• Budget for HST upfront on new construction. Even if a rebate is available, confirm your eligibility before counting on it.
• Check your use intentions. If you are buying a new build but plan to rent it, the rebate rules differ from owner-occupiers.
• Get tax advice before converting property use. A self-assessment obligation can arise without any sale taking place.
• Short-term rental hosts should track their annual revenues against the HST registration threshold and register proactively if they are approaching it.

Frequently asked questions