Do you pay GST/HST when you build or renovate a house? – Moneysense

There are some unique considerations when you build a house or considerably renovate that is important for anyone who is considering it. And there can even be discounts available that money can put back in your pocket.

Is it a substantial renovation?

The concept of a so -called substantial renovation is important for implications for real estate and sales tax. The Canada Revenue Agency (CRA) regards a house as a substantial renovated as 90% or more of the building that existed prior to the start of the work to a certain extent. This percentage is based on the inner area of ​​the building.

The CRA gives various examples of substantial renovations:

• A house has 10 rooms. Eight of the rooms have been fully stripped and rebuilt. Of the remaining two rooms, the floors in the bedroom A is replaced and the floors and a wall are replaced in the bedroom B. Including these two bedrooms, more than 90% of the total wall and floor surface in the house are removed or replaced.

• A house of 5,000 square foot undergoes renovations. There are no renovations in one room of 250 square foot. In another room of 200 square foot, the renovations that are performed do not meet the “deleted or replaced” test. However, the remaining 4,550 square base of the house meets this test.

• The house of Douglas J. consists of a living room, kitchen, family room, four bedrooms and an unfinished basement. The renovation work on this house consisted of replacing the drywall throughout the house, installing laminate floors in the kitchen and bathroom, laying new carpet over the old tile floors in the other rooms and replacing the kitchen counters and cupboards.

It matters how to use the property

The good news is that if you are building a house or considerably renovating that your primary place of residence is, there are generally no consequences for sales tax outside the tax that you pay for materials and work. However, if your construction or renovation is done with the intention of making a profit, things can change – and there may be extra sales tax.

The CRA focuses on whether the transaction is entered into in the course of a so -called adventure or concern in the nature of the trade. If the intention of the builder or renovator is to make a profit – even if they are not a home builder – the CRA can treat them as a “builder” for sales tax.

In this case, the subsequent sale can in fact be subject to GST/HST to be transferred from the sales proceeds. Taxpayers must also be careful when moving home for a short period after construction and then selling. The CRA could still claim that the primary intention was to build, sell and make a profit instead of treating the real estate as their main residence. This can have the consequences for sales tax, as well as implications of income tax for the profit that may not be protected using the main residence exemption.

An important consideration if a sale is subject to GST/HST is that a buyer no longer pays for the property. As an example: if you hope to sell a house with similar properties that sell for $ 1,000,000 in Ontario, where the HST rate is 13%, a buyer pays you only $ 1,000,000 – not $ 1,130,000 ($ 1,000,000 plus 13% HST). That means $ 884,956 Plus 13% HST.

Available discounts

In various circumstances, GST/HST discounts may be available that reduce sales tax repayments in your pocket.

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• You have built up a house or substantially renovated, or involved in building or renovating a house on land that you already owned or rented if your primary place of residence. Part of the sales tax that is paid at your expense can be recovered.

• You have converted a non-residential property into your house. Likewise, part of the sales tax can be recovered from your costs.

• You bought a new house from a builder to use as your primary place of residence. Part of the sales tax that is paid on the purchase can be recovered.

• You built, substantially renovated or bought housing to rent to private individuals as their primary place of residence for long -term residential use. Part of the sales tax that is paid at your expense or purchase can be recovered.

• You qualified for the new first-discount from the home buyer of the GST on houses with a value of a maximum of $ 1.5 million, introduced under a rule in May 2025.

The rules are complex and can depend on the value of the house, or the province or the territory where the house is located.

For example, a house built by the owner may not be eligible for the HST discount on the federal part of the sales tax if the real market value when the work is considerably completed is more than $ 450,000. However, the house may be eligible for a discount from the provincial part of the turnover tax, up to $ 24,000 if you paid HST when you bought the country, or $ 16,080 if you didn’t.

What to do when you build or renovate a house

Given the complexity, it is advisable to consult a professional before you start a large build or renovation. The rules are complicated and the CRA looks very closely at these transactions by performing GST/HST -Audits. There can also be provincial or territory-specific considerations.

An error can lead to a large tax assessment, together with interest and fines.

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About Jason Heath, CFP

Jason Heath is only a reimbursement, only advice certified Financial Planner (CFP) at Objective Financial Partners Inc. In Toronto. He does not sell any financial products.