Custom home builder cross-border tax: tariffed materials, US clients and the rare US job

Tariffs belong in the job cost, not in a footnote

Most builders buy through Canadian distributors, so a tariff arrives as a price increase on an invoice rather than as a customs entry. When you import directly — a cabinetry line, a window package, appliances, structural steel — you are the importer of record, which since October 2024 means an account in CBSA's CARM portal and your own financial security for duties. Duty and any surtax become part of the landed cost of the material and flow into the lot's job cost; the GST charged at the border on the duty-paid value is recoverable as an input tax credit like any other. Tariffs on both sides of the border changed several times in 2025, and as at the time of writing the schedules are still moving, so we treat every tariff figure as a date-stamped assumption in the estimate rather than a constant.

Contractually, the question is who bears the change. Escalation and material-cost clauses only work when you can show the client the difference by item and by lot, which is a bookkeeping task: the quoted cost, the invoiced cost, and the duty or surtax component recorded separately. USD supplier invoices are booked at the exchange rate on the invoice date and settled at the rate on the payment date, with the difference recorded as a gain or loss; how to record USD transactions in Canadian books sets out the routine.

US-citizen and US-resident clients are three different situations

The passport matters less than the residence. A dual citizen living in Brampton changes nothing about your HST, your rebate credit or your contract; their US return is their concern, and the only thing we watch is a deposit wired from a US account, which is recorded at the day's rate. A US resident buying a spec home is a different file entirely.

The eligibility point deserves emphasis. The new-housing rebate turns on the home being the buyer's or a relation's primary place of residence, not on citizenship, so a US resident buying a vacation property does not qualify, and a builder who credits the rebate anyway is the one CRA looks to. When those buyers eventually sell, the section 116 clearance process is their problem, but knowing it exists helps you explain the closing to them.

The occasional US project

A client with a cottage in Michigan or a lake house in upstate New York sometimes asks their Ontario builder to do it, and the answer is usually yes, with conditions. Under the Canada-US treaty, a building site is a permanent establishment only if it lasts more than twelve months, so a single custom home does not by itself create US federal income tax; the treaty position is still claimed on a protective Form 1120-F with Form 8833 attached, and a W-8BEN-E goes to the client so no 30 percent withholding is taken from the draws. State income tax does not always follow the treaty, and residential contractor licensing is set by the state or the county, so both are checked before the price is quoted. Sales tax generally lands on the materials you buy as a contractor rather than on your invoice. Services performed on real property outside Canada are outside the scope of HST, so the Canadian side of the invoice is simpler than the US side.

The hard constraint is people, not tax. Canadian employees cannot generally perform hands-on construction work in the US on a business-visitor entry, so the practical model is a Canadian project manager supervising US-licensed local trades, which also settles the US payroll question before it arises. That is an immigration matter for counsel, and we raise it before anyone books a hotel.

If the builder is a US citizen

A US citizen living in Ontario who owns a building corporation has the thickest cross-border file of anyone on this page. The corporation is a controlled foreign corporation for US purposes, which means an annual Form 5471 and exposure to the US anti-deferral rules on its income. Income taxed at Ontario's small business rate sits below the threshold at which the US high-tax exception would shelter it, so the US calculation cannot be assumed away, and the corporation's bank accounts belong on the owner's FBAR through signature authority. The US rules in this area were amended in 2025, so the modelling is redone each year rather than carried forward. For most builders this section does not apply; for the ones it does, it is the first conversation we have. The full toolkit sits on our cross-border tax services page, and the domestic side of the file is on our builder tax services page.

Source: CBSA — CARM, the CBSA Assessment and Revenue Management system.