Ontario government proposes tax relief for some first-time homebuyers

The Ontario government is proposing to help first-time homebuyers by lowering costs with a sales tax rebate it says could save up to $130,000, when combined with other provincial and federal saving initiatives. 

The proposal, which will be included in next week’s fall economic statement, will rebate the eight per cent provincial harmonized sales tax (HST) for first-time buyers purchasing a home valued up to $1 million. 

It comes after Ontario promised to follow suit if the federal government removed its portion of the HST for first-time homebuyers, which was proposed in June. 

The provincial tax relief will help buyers manage financial challenges in a time where “every dollar counts," said Ontario Finance Minister Peter Bethlenfalvy at a news conference announcing the proposal Tuesday. 

“In short, it means more money that stays where it belongs, in the pockets of hard working Ontario families,” he said. “Through measures like this HST relief, we're helping more young families take that first step into home ownership.”

The provincial initiative combined with existing Ontario reliefs, such as the HST New Housing Rebate, would save first-time buyers up to $80,000 off the cost of a new home, said a news release from the province. 

It said all provincial savings paired with the federal government’s plan to eliminate 5 per cent of the HST for homes valued up to $1 million would equal $130,000 in total savings for first-time homebuyers. 

While homes valued up to $1 million would qualify for the full rebate, there will be partial rebates on a phased-in basis for homes valued up to $1.5 million. 

The rebate is “tremendous news” for first-time homebuyers and home builders across the province, said Ontario Housing Minister Rob Flack at the news conference Tuesday. 

“Uncertainty has led builders and buyers to hit the pause button. Subject to federal legislation, they will soon be able to take their finger off that pause button,” he said. 

“Our mission is simple. We want to get homes built, we want to keep workers on the job, and we want to keep the dream of home ownership alive.”

Implementation of the rebate is subject to the passing of federal legislation, said the province, adding the tax relief will be available for homes purchased on or before May 27, 2025 and before 2031. 

Homes under construction will need to begin before 2031 and be “substantially completed before 2036,” it said.

At a recent housing summit sponsored by the Residential Construction Council of Ontario (RESCON), construction industry experts, professionals and stakeholders indicated that the heavy tax burden is one of the main hurdles in the way of new home construction.