Buyers
Last Updated: Jan 20, 2021
As a first-time homebuyer, you must understand the Ontario land transfer tax. This ultimate guide will help you understand the property transfer tax, how to calculate it, and any rebates and exemptions that may apply.
Understanding Land Transfer Tax
The land transfer tax, sometimes shortened to LTT, is part of the cost of buying a home in Canada. Almost every province assesses this tax - so, if you live in Ontario, you will be required to pay it. Similarly, homebuyers in Toronto will incur an additional municipal tax.
The tax is calculated based on the value of the property being purchased at closing, but you can utilize the asking price to estimate the total cost.
How Much is the Land Transfer Tax in Ontario?
You can calculate the land transfer taxes using a percentage of the purchase price, and the percent will vary depending on the total cost of the home.
Here is a breakdown of the sliding scale:
|
Fee Percentage |
Home Value |
|
0.5% |
$0 to $55,000 |
|
1.0% |
$55,001 to $250,000 |
|
1.5% |
$250,001 to $400,000 |
|
2.0% |
$400,001 to $2,000,000 |
|
2.5% |
Any amount over $2,000,000 |
How do you calculate the land transfer tax?
Let’s break this down further using an example. If you purchase a home valued at $650,000, you will pay 0.5% on the first $55,000 plus 1.0% on the next $195,000. This gives you a total transfer tax of $2,225:
0.5% x $55,000 = $275
1.0% x $195,000 = $1,950
1.5% x $150,000 = $2,250
2.0% x $250,000 = $5,000
Total $9,475
As we mentioned, Toronto homebuyers are subject to an additional land transfer tax at the municipal level. The sliding scale works the same as the one shown above, so you can take that value and multiply it by 2.
If we use the same home value of $650,000, your Toronto property transfer tax will be $9,475. When you take both fees into account, the total is $18,950.
The land transfer tax is a substantial expense, so you must consider this cost when purchasing a home!
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Who Pays the Land Transfer Tax?
So, who has to pay the land transfer tax?
As a buyer, you will always be responsible for paying this fee. In other words, every time that you purchase a condo or house in Ontario, you must pay the transfer tax. The seller will never have to cover this cost, and your real estate attorney will arrange for payment to be made on closing day.
Can I avoid paying land transfer taxes?
How can I be exempt from paying land transfer tax? Several exemptions can prevent you from having to pay the Ontario land transfer taxes. To qualify for this exemption, your real estate transaction must be one of the following:
- Transfer between spouses
- Transfer of farming property between family members
- Transfer from someone to their family business
To ensure that you qualify for one of these land transfer tax exemptions, work with a tax specialist or accountant. They can confirm if you are eligible!
First-Time Homebuyer Land Transfer Tax Rebate
The Ontario land transfer tax is an additional hurdle when it comes to buying a home, so the Canadian government offers a rebate to first-time homebuyers. This serves to encourage individuals to purchase a home and can help them cover the total cost.
When you purchase your first home, you may receive up to $4,000 in credit that can be applied to the land transfer tax. If you buy a home in Toronto, you may be eligible for a rebate of up to $4,475.
To be considered a first-time homebuyer, you cannot have owned a home before – anywhere in the world. In addition, your spouse cannot have owned a home since you have been married.
There are other qualification criteria you must meet as well. You must be a Canadian citizen or a permanent resident, and you have to be at least 18 years old. Similarly, you are required to occupy the home you buy within 9 months of closing.
The $4,000 rebate will be sufficient to cover the land transfer taxes on a home valued up to $368,000. Any amount above that will be your responsibility!
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If you would like to claim the first-time homebuyer land transfer tax rebate, you must fill out an application form. The refund will be granted as soon as the taxes are registered, filed, and paid. Failure to claim the rebate when you register the transfer tax will require you to pay the amount in full – then you have 18 months to file the rebate request.
The land transfer tax in Ontario is a fee assessed to home buyers in the province that is based on the value of the property. If you buy a home in Toronto, you will also be responsible for the municipal property transfer tax. There are some exceptions, however, and you may be eligible for a rebate if you are a first-time home buyer!
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