Buying a home is a significant acquisition. Other than the actual price of the house, there are many costs associated with purchasing property, one of which is the land transfer tax.
What is land transfer tax?
Also known as property transfer tax, land transfer tax is a one-time tax paid when a real estate property or land is transferred from one person to another. Land transfer tax applies to all provinces in Canada except Saskatchewan and Alberta, which instead charge a smaller transfer fee.
Who pays land transfer tax?
Land transfer tax is paid to the province or municipality by the buyer. When you buy property in Ontario, you’ll be required to pay land transfer taxes to the province as part of the overall closing costs.
How is land transfer tax calculated?
In Ontario, the amount home buyers pay as land transfer tax is calculated as a percentage of the property value. The property value includes the purchase price of the property, any benefits and liabilities that come with the purchase, and the cost of home improvements.
The rates charged according to the value of the property include:
- 0.5% for property valued up to and inclusive of $55,000
- 1.0% for property valued over $55,00 to $250,000 inclusive
- 1.5% for property valued over $250,000 to $400,000 inclusive
- 2.0% for property valued over $400,000
- 2.5% for property valued over $2,000,000 with land that features one or two single-family homes
Land transfer tax for first-time homebuyers in Ontario
First-time homebuyers of an eligible home in Ontario may qualify for a partial or full refund of the land transfer tax.
- For purchase and sale agreements entered into before December 14, 2007, the refund only applied to the purchase of a newly constructed home.
- For purchase and sale agreements entered into after December 13, 2007, the refund applies to all homes, whether resale or newly constructed.
Requirements to qualify for a refund
To be considered a first-time homebuyer in Ontario and qualify for a land transfer tax refund:
- You must be a Canadian citizen or a permanent resident.
- You must be at least 18 years old.
- You must occupy the property as your principal residence within nine months of the date of transfer.
- You must have never owned an eligible home or had an interest in an eligible home anywhere in the world, at any time.
- If you are married, your spouse cannot have owned an eligible home or had any interest in an eligible home anywhere in the world while married to you.
If you’re a qualifying homebuyer, you can claim an immediate refund when the land transfer tax is registered, or you can make a rebate claim within 18 months.
There are exemptions are available under certain circumstances.
Non-resident speculation tax
Buyers who are neither citizens nor permanent residents of Canada purchasing property in the Golden Horseshoe area in Southern Ontario must pay a 15% tax referred to as the non-resident speculation tax. They will pay this tax in addition to paying the province’s existing land transfer tax.
There are exemptions or refunds available under certain circumstances. More details can be found at https://www.fin.gov.on.ca/en/bulletins/ltt/2_2006.html
Real estate lawyer in Oakville
If you’re thinking of buying property and are searching for a real estate lawyer in Oakville, contact us at the law office of Anna Gurevich. Let us guide you through the complexities of the real estate transaction and ensure all the relevant taxes are paid once the deal is finalized.
Call us today to schedule an appointment.