Investment Condo in Canada: Can You Claim the New Housing Rebate?

You signed an agreement to buy a pre-construction condo, and you plan to rent it out. Somewhere along the way you heard that new homes can come with a GST/HST rebate, and you want to know whether yours does.

The short answer is that the rebate most people hear about is for owners who will live in the home, not for investors. A second rebate exists for rental units, and this article explains how the two differ, what the rental one requires, and where buyers get tripped up.

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

Why the owner rebate usually does not fit an investment

The new housing rebate under section 254(2) of the Excise Tax Act applies where a builder sells a new condo unit to an individual who acquires it as their own or a relation's primary place of residence, the total consideration is under $450,000, the individual has paid all applicable tax, and ownership transfers after substantial completion. At $450,000 or more, this base rebate is nil.

The intent to use the home that way must be evident at the outset of the purchase. CRA's guidance says a recreational cottage, an investment property, or a home you plan to use on some more distant occasion, such as retirement, does not qualify. An investor who will not live in the unit cannot claim the owner rebate.

There is one important exception. The home can be the primary residence of a relation rather than you, so a parent buying for an adult child who will live there may qualify if every other condition is met, and the first occupant must be the buyer or a relation. Tenants who are not relations do not count.

The rebate that may apply instead

For rental units, the relevant relief is the new residential rental property rebate under section 256.2(3). A purchaser who is not the builder is entitled to it when tax first becomes payable, if the property includes a qualifying residential unit and the tax is not recoverable as an input tax credit.

A qualifying residential unit is self-contained, held for exempt residential rental, and its first use is as a primary residence for at least one year. In plain words, the unit has to be set up and held for rental as a home, and the first people to use it have to live in it as their primary residence for at least a year.

This rebate is not paid where the individual qualifies for the new housing rebate on the same housing. So you are on one track or the other, depending on who will live in the unit.

How the two rebates compare

How the rental rebate amount is worked out

The formula is A × ($450,000 − B) ÷ $100,000. A is the lesser of $6,300 and 36% of the tax, adjusted by the unit's floor-space share in a multi-unit complex, and B is the greater of $350,000 and the unit's fair market value.

That means the rebate shrinks as the unit's value rises and disappears at $450,000, using the formula's own arithmetic. Many city condos are valued above that level, so the rebate may be small or nil. Whether yours is worth claiming depends on its fair market value and the tax paid.

If you are buying through a corporation, a corporation that is not a co-op and is a purchaser and landlord can claim on Form GST524 if the purchase was taxable and it is not the builder.

Traps to watch for

• The rebate is not paid for existing occupied rentals where no GST/HST was payable, for units that are not self-contained or not held for exempt residential leases, or where the tax is recoverable under another law.
• If a qualifying unit that is not part of a multi-unit complex is sold within one year of first occupancy to a buyer who will not use it as a primary residence, the rebate must be repaid with interest at the prescribed rate less 2% per year.
• The separate purpose-built rental housing rebate is a 100% federal-part rebate, but it excludes condos and single units and cannot be claimed together with the rental property rebate on the same property.
• If your agreement was assigned to you, there may be two builders and you may pay tax to both the original builder and the assignor.

What to do next

• Confirm who will live in the unit, because that decides which rebate you are on.
• Gather your agreement, any assignment, and your statement of adjustments.
• Note the date tax first became payable and the closing date, then diarize the two-year deadlines.
• Ask whether your unit's fair market value is likely to leave any rebate after the phase-out.
• Have a lawyer or accountant confirm the choice before you file, especially if a corporation or an assignment is involved.

Frequently asked questions