Do You Pay Sales Tax When Buying a House?
One of the most common questions from homebuyers in Canada is whether they need to pay HST (Harmonised Sales Tax) or GST (Goods and Services Tax) when purchasing a home. The answer depends on what type of property you are buying.
The short version: resale homes are exempt from HST/GST, but new construction homes are subject to HST (with rebates available that can significantly reduce the amount you pay). Understanding these rules is essential for budgeting your purchase and avoiding surprises at closing.
This guide covers when sales tax applies to real estate purchases in Canada, the rebates available for new homes, how assignment sales are taxed, and the difference between sales tax and land transfer tax.
The Quick Answer
Resale Homes
No HST / No GST
Previously owned residential properties are exempt from HST and GST. This includes detached homes, semi-detached, townhouses, and resale condos. You still pay land transfer tax and other closing costs, but no sales tax on the purchase price.
New Construction
HST Applies (13% in Ontario)
Newly built homes purchased from a builder are subject to HST. This includes pre-construction condos, new subdivisions, and substantially renovated homes. Rebates of up to ~$30,300 may be available.
When Does HST Apply to Real Estate?
Here is a comprehensive breakdown of which real estate transactions are subject to HST/GST and which are exempt:
The HST New Housing Rebate Explained
If you are buying a new home, the HST New Housing Rebate can significantly reduce the amount of tax you pay. The rebate has two components — federal and provincial:
Federal Rebate (GST Portion)
- 36% of the federal portion (5%) of HST paid
- Maximum rebate: $6,300
- Full rebate for homes up to $350,000
- Sliding scale between $350,000 and $450,000
- No federal rebate above $450,000
Ontario Provincial Rebate
- 75% of the provincial portion (8%) of HST paid
- Maximum rebate: $24,000
- Available regardless of purchase price
- No price ceiling (unlike the federal rebate)
- Must be primary residence to qualify
Rebate Example: $800,000 New Home in Ontario
This example assumes the home qualifies as a primary residence. Investment properties do not qualify for the new housing rebate.
HST on Assignment Sales
Assignment sales — where the original buyer of a pre-construction home sells their purchase agreement to a new buyer before completion — have specific and often misunderstood tax implications:
HST on the Assignment Profit
The assignor (original buyer) must charge and remit HST on the assignment profit — the difference between the original purchase price and the assignment price. For example, if you purchased at $500,000 and assign at $600,000, HST applies to the $100,000 profit.
HST on the Full Purchase Price
The assignee (new buyer) assumes responsibility for paying HST on the full purchase price of the home from the builder. They may be eligible for the new housing rebate if the home will be their primary residence.
Mandatory Reporting
Since 2022, the federal government requires mandatory reporting of all assignment sales. Builders, developers, and assignors must report these transactions to the CRA. Failure to report can result in penalties and interest.
Income Tax on Profit
The assignment profit is also subject to income tax. The CRA will determine whether the profit is treated as business income (100% taxable) or a capital gain (partially taxable) based on the circumstances — including how many assignments you have done and your original intent when purchasing.
Land Transfer Tax vs. Sales Tax
Many buyers confuse these two taxes. They are completely different and apply in different situations:
HST on Real Estate Services
While the purchase price of a resale home is HST-exempt, the services associated with buying or selling a home are not. HST applies to:
Real Estate Commissions
Agent commissions are subject to 13% HST. On a $10,000 commission, that is $1,300 in HST. For sellers, this is an additional closing cost to budget for.
Legal Fees
Your real estate lawyer's fees and disbursements are subject to 13% HST. A $1,500 legal fee becomes $1,695 with HST.
Home Inspection Fees
Home inspection services are subject to 13% HST. A $500 inspection becomes $565 with HST.
Mortgage Services
Mortgage broker fees (if applicable) are subject to HST. However, mortgage interest itself is not subject to HST. Mortgage insurance (CMHC) premiums are subject to provincial sales tax in some provinces.
Moving Services
Professional moving companies charge HST on their services. A $2,000 move becomes $2,260 with HST.
Renovation Services
All renovation and construction work is subject to HST. If you are renovating after purchase, budget an additional 13% for tax on contractor services and materials.
Frequently Asked Questions
Do you pay sales tax (HST/GST) when buying a resale home?
No. In Canada, the purchase of a previously owned (resale) residential property is exempt from GST/HST. This is one of the most important tax distinctions in Canadian real estate. When you buy a home that has been lived in before — whether it is a detached house, semi-detached, townhouse, or condominium — you do not pay HST or GST on the purchase price. However, you will still pay other taxes and fees at closing, including land transfer tax (in Ontario, both provincial and municipal in Toronto), legal fees (which are subject to HST), and potentially other closing costs. The exemption applies only to the purchase price of the resale property itself.
Do you pay HST on a new construction home?
Yes. The purchase of a newly constructed home (or a substantially renovated home) from a builder is subject to HST in Ontario (13%) or GST (5%) in provinces without a harmonised sales tax. The HST is typically included in the builder's advertised purchase price, but this is not always the case — some builders quote prices plus HST. Always confirm whether the listed price includes or excludes HST. However, buyers of new homes may be eligible for rebates that significantly reduce the effective tax paid. The federal portion rebate (GST New Housing Rebate) and the Ontario provincial portion rebate (Ontario New Housing Rebate) can return a substantial portion of the HST paid, subject to price thresholds and eligibility requirements.
What is the HST New Housing Rebate?
The HST New Housing Rebate allows buyers of new or substantially renovated homes to recover a portion of the HST paid. In Ontario, there are two components: the federal rebate (GST New Housing Rebate) provides up to $6,300 for homes priced up to $350,000, with a sliding scale reduction for homes between $350,000 and $450,000 (no federal rebate above $450,000). The Ontario provincial rebate provides up to $24,000 (75% of the provincial portion of HST) with no price ceiling — this rebate is available regardless of the home's price. Combined, the maximum rebate is approximately $30,300. The rebate can be assigned to the builder at closing (reducing the amount you pay) or claimed directly from the CRA after purchase. Eligibility requires that the home be your primary residence.
Is HST charged on assignment sales?
Yes, in most cases. An assignment sale — where the original buyer of a pre-construction home sells their purchase agreement to a new buyer before the home is completed — is subject to HST on the assignment profit (the difference between the original purchase price and the assignment price). Additionally, the new buyer (assignee) assumes responsibility for paying HST on the full purchase price of the home from the builder. Assignment sales have become increasingly scrutinised by the CRA, and all profits must be reported. The original buyer must also determine whether their assignment profit is treated as business income or a capital gain, which affects how it is taxed. Since 2022, the federal government has implemented rules requiring mandatory reporting of assignment sales.
Do you pay HST on land purchases?
It depends on the seller and the intended use. Vacant land sold by an individual for personal use is generally exempt from HST. However, if the land is sold by a GST/HST registrant (such as a developer or builder), or if the land has been subdivided into more than two lots, HST typically applies. Commercial land purchases are also subject to HST. If you are buying land to build a home for personal use, and the seller is not a GST/HST registrant, you generally will not pay HST on the land. However, you will pay HST on the construction costs when you build. The rules around land and HST are complex — consult a tax professional before purchasing vacant land.
What is the difference between land transfer tax and sales tax?
These are two completely different taxes, and many buyers confuse them. Land transfer tax (LTT) is a provincial tax charged on the transfer of property ownership — it applies to every real estate purchase in Ontario, whether new or resale. In Toronto, there is an additional municipal land transfer tax. LTT is calculated on a sliding scale based on the purchase price. Sales tax (HST/GST) is a federal/provincial consumption tax that applies to the purchase of new goods and services — including newly built homes. It does not apply to resale homes. So when you buy a resale home, you pay land transfer tax but no HST. When you buy a new home, you pay both land transfer tax and HST (though the HST may be partially offset by the new housing rebate).
Related guides: Buyer Closing Costs | Capital Gains Tax | Seller Closing Costs | Closing Agent Guide