When a property exchanges hands in Ontario, Land Transfer Tax is paid to the government at the time to title registration or transfer of deed in the new buyer’s name. In this write-up, we will explore and try to make it clear for buyers how that calculation is done with an example.
Below are the rate slabs used in the calculation of Land Transfer Tax in Ontario:
|Amounts <= $55,000||0.5%|
|Amount in the range $55,000 to $250,000||1.0%|
|Amount in the range $250,000 to $400,000||1.5%|
|Amount exceeding $400,000||2.0%|
|Amounts exceeding $2M||2.5%|
|Purchase price in range $55,000 - $250,000||[Purchase price × 0.01] - $275|
|Purchase price in range $250,000 - $400,000||[Purchase price × 0.015] - $1,525|
|Purchase price in range $400,000 - $2M||[Purchase price × 0.02] - $3,525|
|Purchase price in excess of $2M||[Purchase price × 0.025] - $13,525|
Let’s take a quick example, applying our formula for arriving at Land Transfer Tax, assuming we are purchasing a property for $578,000.
Land Transfer Tax = ($578,000 x 0.02) – $3,525
= $11,560 – $3,525
Now that we are aware of the land transfer tax calculation, let’s consider some rebates which Ontario government extends to first-time homebuyers. They are eligible for a maximum of $4,000 rebate in land transfer taxes at the time of purchase. This is an immediate refund and can be claimed at the time of property registration by your lawyer. Below are some conditions required to fulfill.
• The purchaser must be over 18 and occupy home within 9 months of registration.
• The purchase or spouse cannot have owned a home anywhere in the world.
• The eligibility is also limited to Canadian Citizens and permanent residents of Canada.
In our above example, if the purchaser was a first-time home buyer, the LTT to be given at the time of registration would be $4,035.
Toronto Municipal Land Transfer Tax – If you are buying property in Toronto, the municipality charges a land transfer tax for the municipality in addition to the provincial land transfer tax discussed above. Essentially, for a property in Toronto, you would be paying just the double of land transfer tax you pay for property elsewhere in Ontario.
So, in our above example, if the property were located in Toronto, the land transfer tax would have been $16,070.
Municipal Land Transfer Tax (Toronto) also has a provision for the rebate to be availed by first-time home buyers up to a maximum of $4,475. Extending our example if the buyer for the Toronto property were first-time home buyers they would have received both provincial ($4,000) as well as municipal ($4,475 rebates.
The land transfer tax payable for Toronto property with a price of $578,000 = $16,070 – $4,475 – $4,000 = $7,595
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