As a real estate agent I get asked a bunch of questions on a daily basis. Some of them are very straightforward and some of them are very complicated.
A common one that I answer at least weekly is in regards to the Ontario Land Transfer Tax.
So, let’s dip into the mailbag…
Q: How does Ontario Land Transfer Tax Work? How much and who pays?
In Ontario, the Land Transfer Tax is the responsibility of the buyer. It will be paid for as part of your closing costs before you take possession of your new home. The Land Transfer Tax is variable and depends upon the purchase price of the home.
Example of how to calculate Ontario Land Transfer Tax
Let’s say your real estate sales representative has negotiated a purchase price of $1,000,000 for your home in Milton. There are two ways to calculate the total. The first is the quick and easy way – use this “Land Transfer Tax Calculator”. It will do all the heavy lifting for you.
But if you’re interested to know how this all breaks down, then check out more below.
The current tax structure is as follows (and has been this way since 1989):
Amounts up to and including $55,000 = 0.5%
Amounts between $55,000 – $250,000 = 1.0%
Amounts between $250,000 – $400,000 = 1.5%
Amounts over $400,000 = 2.0%
Therefore, the total amount of the Tax would be calculated as follows:
$55,000 x 0.005 = $275
$250,000 – $55,000 = $195,000 x .01 = $1950
$400,000 – $250,000 = $150,000 x . 015 = $2250
$600,000 x .02 = $12,000
Total Land Transfer Tax = $275 + $1950 + $2250 + $12,000 = $16,475
So, $16,475 would be added to your total closing costs. Two things should be noted: 1) if you’re purchasing in Toronto, there is a second Land Transfer Tax that you’d be required to pay; and 2) if you are a first-time homebuyer, you are eligible for a $4000 rebate on the provincial land transfer tax.
Therefore, if you’re a first-time home buyer you’d only have to pay $12,475 in this case.
The Toronto Land Transfer Tax
Yes, purchasing in Toronto requires an additional Land Transfer Tax. Toronto is the only municipality currently in Canada that charges an additional tax. While other municipalities could potentially have this power in the future, Toronto remains the only one.
The tax breakdown in Toronto is the same as Ontario’s. Therefore, if you’re buying in Toronto, your land transfer tax will be double the above.
The only difference would be that first time home buyers are eligible for a rebate of $4,475 so you’d save an additional $475.
Therefore your total taxed owed if you’re NOT a first-time home buyer would be $32,950.
And if you ARE a first-time home buyer you would owe $24,475.
That’s quite a chunk of change to come up with on closing, so you should be taking that into account when getting your pre-approval done by your lender.
The First-Time Home Buyer Rebate
As noted above, first-timers do get a break on both the Ontario Land Transfer Tax and the Toronto Land Transfer Tax.
You’d be eligible for up to $4,000 on the Ontario Land Transfer Tax Rebate and up to $4,475 on the Toronto Land Transfer Tax Rebate.
There are some situations where you might not qualify as a first-time home buyer or for the full amount, but to find out it’s best to speak to your lawyer who will help make that determination.
Conclusion
The Land Transfer Tax is an essential part of budgeting for closing costs. It’s important to understand the difference in cost between Toronto and the rest of the GTA.
If you’d like more detail on the matter, please contact me and I’ll put you in touch with recommended real estate lawyers.
