Substantial Renovation GST/HST Rules
The 90% test for a substantial renovation and what it means if you live in, sell or rent the home afterwards.
The short version
- For GST/HST, a substantial renovation is one where all or substantially all (in practice 90% or more) of the interior of a house is removed or replaced. The result is treated like a newly built home.
- The foundation, exterior walls, interior supporting walls, floors, roof and staircases don't have to be replaced, and don't count in the 90%.
- Renovate your own home that much and live in it: you may qualify for the owner-built new housing rebates.
- Renovate that much and sell it: you're a "builder", and the sale is subject to GST/HST, even though used homes are normally exempt.
- Renovate that much and rent it out: you generally have to self-assess GST/HST on its value when the first tenant moves in, then claim the rental rebate.
Substantial Renovation GST/HST Rules
"Substantial renovation" sounds like a contractor's term. It's actually a tax trigger with a percentage attached. Gut a house to the studs and you've changed its GST/HST status: what was a used home is now, for tax purposes, a new one. That can mean a rebate if you live in it, or a large tax bill if you sell or rent it. The test is technical, and people find out which side they're on after the drywall is up.
The 90% Test
| Not counted (can stay) | Counted toward the 90% (interior) |
|---|---|
| Foundation | Non-load-bearing interior walls |
| Exterior walls | Ceilings, drywall and plaster |
| Interior supporting (load-bearing) walls | Floor coverings, subfloor where replaced |
| Floors (structure) | Kitchens, bathrooms, cabinetry, fixtures |
| Roof | Electrical, plumbing, heating systems |
| Staircases | Interior doors, windows (often), trim |
CRA measures the interior of the house that existed before the work, generally by floor area of the parts removed or replaced. Unfinished areas (garages, crawl spaces, unfinished basements) are generally not part of the interior measured. An addition that at least doubles the living space can also count as a substantial renovation for the rebates.
Common results: a full gut renovation usually qualifies. Renovating a kitchen, two bathrooms and the floors usually doesn't, however expensive. A renovation that keeps the bedrooms intact usually doesn't.
Does my renovation meet the 90% test?
Describe what was there before, what you removed or replaced and the floor areas. The assistant estimates where you are against the 90% test and tells you what it means if you live in it, sell it or rent it.
What Happens Next Depends on What You Do With It
| After a substantial renovation you… | GST/HST result |
|---|---|
| Live in it as your primary residence | Owner-built rebates may apply on the GST/HST you paid; see owner-built home rebate. A later sale after living there is generally exempt |
| Sell it (bought to renovate and resell) | You're a builder: GST/HST applies to the sale price; you claim input tax credits if registered; the buyer may get the new housing rebate |
| Rent it out long-term | Self-supply: you self-assess GST/HST on the fair market value when the first tenant moves in, then claim the rental property rebate |
| Rent it short-term | Self-supply rules can still apply, without the long-term rental rebate |
The middle row is the expensive surprise for renovators and flippers: 13% HST in Ontario on a $900,000 sale is $117,000 before input tax credits and rebates. See house flipping tax for the income tax side.
Get your GST/HST set up right the first time
The GST/HST SmartFile runs both $30,000 tests on your sales, compares the quick method with the regular method, and fills in form GST74 if the quick method wins.
Renovations That Aren't Substantial
Most renovations don't meet the test. Then the home stays a used home: no GST/HST on a later sale (if you're not in the business of selling homes), and no new housing rebate on your renovation costs. The contractor's GST/HST on the work is simply part of the cost (see GST/HST on home renovations), and part of your cost base for income tax if it's a rental; see repairs vs improvements.
Keep the Evidence
- Photos of every room before demolition.
- Drawings or measurements of the original interior.
- Contractor scope documents and invoices that show what was removed and replaced.
- Building permits and the date you (or a tenant) moved in.
Whether you want to prove you met the 90% test (for a rebate) or that you didn't (to keep a sale exempt), photos taken before the work are the evidence CRA finds most convincing. Records rules are on recordkeeping requirements.
In Ontario
Ontario's provincial rebates for substantially renovated homes, and how CRA reviews the 90% test there, are covered in detail on our sister site, OntarioHSTRebates.ca.
The overview is on GST/HST on new homes and the new housing rebate.
Substantial Renovation Questions
What is a substantial renovation for GST/HST?
A renovation in which all or substantially all, in practice 90% or more, of the interior of an existing house is removed or replaced. The foundation, exterior walls, interior supporting walls, floors, roof and staircases can be kept.
Do I charge HST when I sell a substantially renovated house?
If you renovated it to sell, you are generally a builder and the sale is subject to GST/HST. If you lived in it as your primary residence after renovating, a later sale is generally exempt.
Can I get a rebate for a substantial renovation of my own home?
Yes. If you or a relation live in it as a primary residence, you may claim the owner-built new housing rebates on the GST/HST you paid.
What if I substantially renovate a house and rent it out?
You generally must self-assess GST/HST on the fair market value when the first tenant moves in, and you may then claim the new residential rental property rebate.
Does a big kitchen and bathroom renovation count?
Usually not. Unless about 90% of the interior is removed or replaced, the home remains a used home for GST/HST.
Sources: CRA, Guide RC4028 (substantial renovation); GST/HST and home construction; New residential rental property rebate. Checked October 2026. Measuring the 90% is fact-specific; CRA's policy statements give examples rather than a formula, and we can't predict the result for a particular renovation.
Last reviewed October 4, 2026 against CRA and Government of Canada sources. How we check our facts.