The views expressed in this column are solely those of the author.
New-home buyers in Ontario are currently benefiting from substantial HST relief of up to $130,000 on eligible transactions. But there is an important distinction that buyers, and the agents advising them, need to understand.
We are starting to see builders advertise new-home prices as “exclusive of HST.” That does not mean “after the HST rebate.”
When the enhanced HST relief was first introduced, many builder price lists showed prices described as “after HST rebate,” or otherwise presented a price that already reflected the anticipated rebate. For many buyers, that made the number easier to understand.
A price advertised as “exclusive of HST” works differently. It is the price before HST is added. The applicable HST must then be calculated, and only after that are the rebates or other relief the particular purchaser qualifies for applied. That distinction can materially change the actual amount payable.
Marketing a home using an HST-exclusive price is not necessarily incorrect, particularly where it is clearly disclosed. But it can create misunderstanding if buyers assume the advertised number already reflects the available HST relief. And if that misunderstanding is not identified early, the difference can become a very unpleasant surprise at closing.
What the numbers look like
Under Ontario’s current enhanced HST relief, eligible purchasers can receive relief equivalent to the full 13 per cent HST on homes up to $1 million. Maximum relief of $130,000 continues up to $1.5 million, then declines until the enhanced relief effectively disappears at $1.85 million, leaving the existing Ontario rebate of up to $24,000, where applicable.
Here is what that can mean in practice:
The new relief is clearly significant. At a purchase price of $1.5 million before HST, for example, an eligible buyer could benefit by about $106,000 compared with the previous $24,000 rebate regime. But that does not make a $1.5-million “exclusive of HST” home a $1.5-million acquisition. In this example, the purchase price after HST relief would be about $1.565 million.
Watch the lot premium and other upgrades
There is another important point: lot premiums and upgrades can change the HST calculation.
Take a home advertised at $1,475,000 exclusive of HST. Assuming the buyer qualifies for the maximum relief, the purchase price after HST relief would be about $1,537,000.
Now add a $75,000 lot premium. The price before HST becomes $1,550,000, pushing the purchase above the $1.5-million threshold, where the enhanced HST relief begins to decline. The resulting purchase price rises to about $1,637,000.
So although the lot premium itself is $75,000, the buyer’s total cost increases by roughly $100,000.
Why? Because the buyer is not only paying HST on the additional $75,000. Crossing the $1.5-million threshold also reduces the amount of HST relief available. In other words, a $75,000 upgrade or lot premium can cost considerably more than $75,000 once its impact on HST and the rebate is taken into account.
| Advertised price (exclusive of HST) | Approx. HST relief* | HST portion remaining to be paid after assumed relief | Actual purchase price after current relief | Price under previous $24K rebate (for primary residence) | Benefit of new relief |
|---|---|---|---|---|---|
| $900,000 | $117,000 | $0 | $900,000 | $993,000 | $93,000 |
| $1,000,000 | $130,000 | $0 | $1,000,000 | $1,106,000 | $106,000 |
| $1,250,000 | $130,000 | $32,500 | $1,282,500 | $1,388,500 | $106,000 |
| $1,500,000 | $130,000 | $65,000 | $1,565,000 | $1,671,000 | $106,000 |
| $1,550,000 | approx. $114,857 | approx. $86,643 | approx. $1,636,643 | $1,727,500 | approx. $90,857 |
| $1,650,000 | approx. $84,571 | approx. $129,929 | approx. $1,779,929 | $1,840,500 | approx. $60,571 |
| $1,750,000 | approx. $54,286 | approx. $173,214 | approx. $1,923,214 | $1,953,500 | approx. $30,286 |
| $1,850,000 | $24,000 | $216,500 | $2,066,500 | $2,066,500 | $0 |
*Illustrative only. Actual entitlement depends on the purchaser, transaction structure, agreement date, occupancy requirements and other eligibility criteria. Buyers should confirm their entitlement with the Canada Revenue Agency and their lawyer or tax adviser.
For buyers, and their agents
Before comparing a new build with another development or with a resale property, make sure you know:
- Is the advertised price inclusive or exclusive of HST?
- What is the actual price after lot premiums and upgrades?
- What HST relief does this particular buyer actually qualify for?
The rebate is valuable, but the headline price can still be misleading. For buyers and agents, the real question is simple: what will this home actually cost at closing?
Mohammad Abusaa, P.Eng., MBA, ATS, is Broker of Record of AKARAT Group Real Estate Brokerage in Oakville, Ontario, and a Professional Engineer with an Accredited Tier Specialist designation, a data centre design and operations credential from the Uptime Institute.
With more than 25 years of professional experience, including over 15 years in Ontario’s real estate industry, Mohammad’s career has spanned engineering, energy, mission-critical infrastructure and real estate, with experience in data centres, district energy systems, utility infrastructure and large-scale projects.
