GST refund for buyers of a newly built or substantially renovated first home

TPS Rebate for Buyers of a New or Majorly Renovated Home

Buying a first new home (or one that has been completely transformed) is expensive: down payment, notary fees, property taxes, furnishing… Fortunately, there is a TPS rebate that can ease the bill for first-time buyers. When used properly, this tax credit can represent thousands of dollars and make a real difference in your budget and your first-time homebuyer mortgage.

1. What is the Home TPS Rebate?

The TPS rebate (TPS Home) – often called the new home TPS rebate – is a federal government home-buying program that allows you to recover a portion of the TPS paid on a new home or :

• a substantially renovated home (modified significantly);
• an owner-built home;
• certain purchases of new condominium units (condos).

The goal: reduce the net cost of the GST on your residential project, particularly for a first-time buyer who must already deal with a limited down payment and a first-time buyer mortgage often at the limit of their capacity.

2. Who qualifies as a first-time buyer?

The GST rebate program is not limited to first-time buyers, but if you are a first-time buyer, you are typically in the most advantaged segment:

• You are buying your first home to live in as your primary residence;
• You are an individual (not a builder or investor buying for pure rental purposes);
• The Home is new or substantially renovated (or you built it yourself).

In practice, a first-time buyer who combines this TPS rebate with other incentives (TFSA/RRSP, RAP, tax credits, etc.) can significantly reduce their overall Taxes (federal and property taxes) related to the purchase.

3. Types of eligible properties

For the Home TPS Rebate to be possible, the dwelling must be eligible:

1. Move-in ready new home

• New construction purchased from a builder;
• You pay the TPS on the purchase price (often included and handled by the builder).

1. New condo

• New condominium unit in a residential complex;
• Same principle: the TPS is charged on the price paid.

1. Owner-built

• You have your Home built yourself (or by multiple contractors);
• You pay the TPS on materials and services;
• You may apply for a rebate of a portion of the TPS paid.

1. Majorly renovated residence (substantially renovated)

• Generally, the renovation must be so significant that the home is practically new (e.g., 90% of interior redone);
• Certain conversions (non-residential building converted to residential) may also be eligible.

4. Price cap and calculation of the TPS Rebate

The reimbursement amount is capped and declines as the property's price increases.

In simple terms (popularized version):

• Maximum rebate for lower-value homes;
• Rebate gradually reduced when the Home price exceeds a certain threshold;
• No rebate beyond a maximum price (high-end homes).

Impact for a first-time buyer mortgage:

• The closer your Home is to the lower threshold, the more attractive the TPS Rebate is;
• Beyond a certain price, you can no longer count on this boost to reduce your costs.

This reality can influence your purchase budget, the structure of your Mortgage, and how your mortgage broker will optimize your file.

5. How the TPS rebate interacts with your Mortgage?

5.1. When does the money actually end up in your pockets?

Depending on the type of transaction:

• New home or condo purchased from a builder
• Often, the builder already includes the TPS rebate in the advertised price;
• You sign a “net TPS” price, and the builder claims the rebate themselves;
• Result: your Mortgage is lower than if you had paid all the TPS without a rebate.
• Owner-built or major renovation
• You pay the TPS on each invoice;
• You are the one who files the TPS Rebate claim with the CRA;
• The amount recovered arrives after the fact, which can be used to:
• reimburse part of your line of credit used for the work;
• or make a lump-sum payment on your mortgage.

5.2. Concrete impact on your mortgage

• A TPS Rebate of a few thousand dollars can:
• reduce the final amount borrowed;
• help you keep your debt ratios within lenders' norms;
• allow you to choose a payment structure (amortization, rate) that's more comfortable.

For a first-time buyer, this adds to other levers: TFSAAP, RAP, tax credits, and Taxes credits (credit for first-home purchase, municipal/property tax credits in certain local programs, etc.).

6. Other government home-buying programs to combine

The Home TPS Rebate is just one element of the full set of tools available. As a Quebec first-time buyer, you can often combine:

• TFSAAP (Tax-Free Savings Account for First-Time Home Purchase)
• To accumulate an untaxed down payment;
• RRAP (Home Ownership Assistance Program)
• To withdraw from your RRSPs without immediate tax;
• First-time Buyer Credits (federal and Quebec)
• Reduce your tax bill;
• Some property tax credits or deferrals or home tax credits, depending on municipality or province;
• The Home TPS Rebate on a new or renovated home, which lowers the net acquisition cost.

Together, these tools can easily represent tens of thousands of dollars in cumulative benefits.

7. Practical steps to apply for the TPS rebate

Here is the general logic (simplified; forms and technical details vary):

1. Confirm eligibility

• Property type (new, owner-built, major renovation);
• Usage (principal residence, not a full-time rental);
• Purchase price within permitted limits.

1. Keep all proofs

• Sales contract, construction contract;
• Detailed invoices for materials and services (for owner-built/renovations);
• Proof of TPS payment.

1. Fill out the required forms

• Federal forms specific to the New Home Owner-Built TPS Rebate;
• Deadlines: usually the application must be filed within a fixed deadline after completion of work or purchase.

1. Plan for the effect on your financing

• Discuss with your broker or banker:
• integration of the TPS Rebate into your Mortgage arrangement;
• better strategy between increasing the down payment or repaying more capital later.

8. TPS, QST and Property Taxes: don’t mix everything up

Important to distinguish:

• TPS (and QST) : consumption taxes on the construction or purchase of a new/renovated home;
• Property Taxes / Home Taxes (municipal and school) : charged annually by the municipality / school board.

The Home TPS Rebate targets the TPS (and sometimes a portion of the QST through a separate program), not your annual property taxes. However, some local programs may offer a home tax credit or a temporary freeze of certain Taxes for specific projects – another aspect to verify with your advisor.

Conclusion: a key tool to integrate into your first-time buyer strategy

For a first-time buyer purchasing a new or substantially renovated home, the Home TPS Rebate is an important lever to:

• reduce the net cost of ownership;
• ease the pressure on your first-time buyer mortgage;
• optimize all of your Taxes and government home-buying programs.

By intelligently combining the TPS Home, TFSAAP, RAP, tax credits, and smart mortgage strategies, you can turn a project at the edge of your budget into a much more comfortable purchase.

The key: plan the TPS Rebate from the start of your project, with your mortgage broker and your tax professional, rather than thinking about it after the fact. This is often what makes the difference between a first Home that’s “just enough” … and a first Home that’s really well suited to your financial situation.