So you're getting ready to purchase a home and are looking into all of the costs involved with this big purchase. One of the largest parts of your closing costs on a home purchase will be your land transfer tax. It’s important to understand what land transfer tax is and how it is calculated so you can budget for it and avoid any surprises.
WHAT IS LAND TRANSFER TAX? Land Transfer Tax is a government tax which buyers (not sellers) of property in Ontario pay on closing as part of their closing costs. The tax amount will vary depending on the property & the property's value. Your realtor & real estate lawyer can assist you with breaking down what you can expect to pay so you can budget accordingly.
There are two different land transfer taxes - the Ontario Land Transfer Tax (Provincial) and the Toronto Land Transfer Tax (Municipal). If you are purchasing a home in Toronto, you must pay both the Provincial and the Municipal land transfer taxes. If you are purchasing a home in Ontario but outside of Toronto, you will have to pay only the Ontario land transfer tax. The Toronto land transfer tax applies within the following boundaries: Steeles Avenue as the North border, Etobicoke as the West border, Scarborough as the East border and Lake Ontario as the South border.
SO HOW MUCH IS LAND TRANSFER TAX IN TORONTO & ONTARIO? In order to get an estimate on the cost of your land transfer tax, you take the property’s purchase price & calculate the tax amount based on the percentages as outlined below. Or just plug the numbers into an online land transfer tax calculator such as this one; https://www.ratehub.ca/land-transfer-tax.
ONTARIO LAND TRANSFER TAX RATES:
To calculate the total Ontario Land Transfer Tax for the purchase of Residential properties in Ontario, add the following together:
0.5% on the first $55,000 of the purchase price
1.0% of the amount from $55,000 to $250,000
1.5% of the amount in excess of $250,001 to $400,000
2.0% of the amount in excess of $400,000 to $2,000,000
2.5% of the amount in excess of $2,000,000
TORONTO LAND TRANSFER TAX RATES:
To calculate the total Toronto Land Transfer Tax for the purchase of Residential properties in Toronto, add the following together:
0.5% on the first $55,000 of the purchase price
1.0% of the amount from $55,000 to $250,000
1.5% of the amount in excess of $250,001 to $400,000
2.0% of the amount in excess of $400,000 to $2,000,000
2.5% of the amount in excess of $2,000,000
CAN I GET A LAND TRANSFER TAX REBATE AS A FIRST TIME HOME BUYER? First time home buyers in Ontario are eligible for a rebate on the Ontario land transfer tax, up to a maximum of $4,000. First-time homebuyers purchasing a home in Toronto are eligible to receive a rebate up to a maximum of $4,475. This means that if the home you are purchasing is in Toronto, you can receive a maximum total rebate of $8,475 across your land transfer taxes fees as whole. There are some stipulations for qualifying as a first time home buyer - check out the eligibility requirements below.
Eligibility
The buyer must be a Canadian citizen or permanent resident of Canada
The buyer must be older than 18 years
The buyer must occupy the home within nine months of purchase
The buyer cannot have owned a home anywhere in the world
The buyer's spouse cannot have owned a home while being your spouse
ARE THERE ANY EXEMPTIONS?
There are certain situations where you are not required to pay land transfer tax, such as transfers of farmed land between family members, property transfer between spouses, transfers from an individual to a family business corporation and transfer of a life lease in a non-profit organization situation. When in doubt, always check with your realtor and real estate lawyer.
If you have any questions about land transfer tax, please don't hesitate to let me know - I'm happy to help.
Yours Truly,
The Condo Confidential
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