HST on Renovations in Ontario: What Homeowners Should Know

Tax is the part of a renovation budget homeowners most often overlook. In Ontario, most renovation labour and materials are subject to HST, and — importantly — there is generally no rebate for ordinary renovations to a home you already live in. The big exception is a "substantial renovation," which the tax rules treat almost like building new. This guide explains the structure so you know which situation you are in; it deliberately avoids quoting rebate amounts, because those depend on your specifics and change.

The basics: HST on renovation work

• Ontario's Harmonized Sales Tax (HST) is currently 13% and generally applies to renovation labour and materials — confirm the current rate and application with the CRA.
• For an ordinary renovation to your existing home — a new kitchen, a bathroom, a finished basement — the HST you pay is generally a cost with no rebate back to you.
• A GST/HST-registered contractor charges HST on their invoice; that is the normal, expected way tax appears on a renovation.

The main exception: a "substantial renovation"

The tax rules single out a substantial renovation — essentially a renovation so extensive it is treated like building a new home. The CRA describes this with what is commonly called the "90% test": very broadly, substantially all (about 90% or more) of the interior of the existing house is removed or replaced. A renovation that meets this definition can be eligible for the GST/HST New Housing Rebate, which also has an Ontario component for the provincial portion of the HST. An addition alone, or a normal room-by-room renovation, generally does not meet the test.

• Substantial renovation — meets the CRA's 90% test; may qualify for the GST/HST New Housing Rebate (including the Ontario new-housing rebate for the provincial portion).
• Major addition converting the home into effectively a new house — may be treated similarly in some cases; this is fact-specific.
• Ordinary renovation of an existing home — generally no rebate; the HST is simply part of the cost.
• Rental or income-producing property — different rules can apply (for example, the New Residential Rental Property Rebate); get specific advice.

How to handle HST sensibly on a renovation

• Budget for HST on the full project from the start — for an ordinary renovation, treat it as a real cost, not an afterthought.
• Use a legitimate, GST/HST-registered contractor and keep proper invoices — cash "no-tax" deals leave you with no paperwork, no warranty recourse, and their own risks.
• If your project is a near-total gut, ask an accountant early whether it could meet the substantial-renovation definition and the New Housing Rebate — the eligibility and paperwork matter and there are deadlines.
• Keep all invoices and documentation regardless — you need them for any rebate claim and for your records.
• Verify everything against the CRA's current guidance or a professional before counting on a rebate.