Land Transfer Tax in Ontario: A Comprehensive Guide

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Are you looking to buy a home in Ontario? While navigating through the process, you'll come across the Land Transfer Tax, a common step for new homeowners. If you're wondering whether you'll need to pay this tax or if you qualify for any rebates, you're in the right place. In this post, I will guide you through everything you need to know about the land transfer tax in Ontario and how to make the most of your opportunities. Let’s get started:

What is Land Transfer Tax?

A land transfer tax is a fee that must be paid by the buyer of a property before the transfer of ownership takes place. The total tax amount is calculated based on the property’s purchase price and can vary from province to province. It is typically included in the closing costs associated with buying a home.

The land transfer tax in Ontario comprises two portions: a provincial and a municipal one, as outlined in the Land Transfer Tax Act. The provincial land transfer tax must be paid for all properties purchased in Ontario, while the municipal land transfer tax only applies to properties situated within certain municipalities.

Who Pays Land Transfer Tax?

When transferring property ownership in Ontario, the buyer is responsible for paying the associated tax, whether the property is residential or commercial. This amount must be paid in full before the property can be transferred to the new owner, so ensure that you factor in this cost when budgeting for your property purchase. Keep in mind that if you are buying a home with another individual, both of you are responsible for paying their share of this tax.

How to Calculate Land Transfer Tax

The exact amount of the land transfer tax is typically calculated as a percentage of the property’s estimated value, which is often close to the purchase price. In Ontario and several other provinces, the percentage you’ll pay will be higher for more expensive homes. As such, the land transfer tax in Ontario can be calculated as:

  • 0.5% on amounts up to and including $55,000
  • 1.0% on amounts exceeding $55,000 and up to and including $250,000
  • 1.5% on amounts exceeding $250,000 and up to and including $400,000
  • 2.0% on amounts exceeding $400,000
  • 2.5% on amounts exceeding $2,000,000, if the land contains one or two single-family residences

For example, if you are purchasing a home in Ontario that costs $500,000, your land transfer tax would be:

  • 0.5% on the first $55,000 of the price = $275
  • 1% on ($250,000 minus $55,000) = $1,950
  • 1.5% on ($400,000 minus $250,000) = $2,250
  • 2% on the final ($500,000 minus $400,000) = $2,000

Can You Avoid Land Transfer Tax?

If you are a first-time home buyer, you may be eligible to get a portion (or all) of your tax payment refunded. Plus, you may be able to avoid paying the land transfer tax when:

  • Purchasing a newly built home
  • Transferring the property from one spouse to another
  • Transferring the property from parent to child
  • Transferring the property from a person to a family business
  • Transferring the farming property from one family member to another

Each province and municipality will have its own rules regarding land transfer tax exemptions. If you have any questions or concerns, don’t hesitate to contact me for additional guidance in the matter.

Ontario Land Transfer Tax Rebates

Some provinces allow for land transfer tax rebates. For instance, in Ontario, first-time home buyers may be eligible for a rebate of up to $4,000.

To claim a refund, you must be at least 18 years old, and you and your spouse cannot have owned a home anywhere in the world. In other words, if both you and your spouse are first-time home buyers, you may be eligible to receive the full rebate on the land transfer tax paid at closing.

If you are purchasing a property with another individual who isn’t your spouse, things can get tricky. In such situations, the refund will be reduced to be proportionate to the interest acquired by the parties who do qualify for the rebate. Let’s say you’re a first-time home buyer purchasing a home with your parent, who has previously owned a house. If you own 50% of the property, you will qualify for 50% of the total land transfer tax rebate.

Other Costs Associated With Home Buying

As you navigate through the home-buying process, don’t forget to consider other costs beyond the land transfer tax in Ontario. In addition to the mortgage financing itself, you will also need to set aside a budget for closing fees, property inspection, and homeowners’ insurance. 

  1. Closing Fees: These may include legal fees, title insurance, and other administrative costs. The exact amount of closing fees can vary depending on factors such as the purchase price of the property and any applicable taxes or levies.
  2. Property Inspection: This inspection assesses the condition of the property, identifying any existing or potential issues. The cost of a property inspection depends on the size and complexity of the property, but it typically ranges from a few hundred to a thousand dollars.
  3. Homeowners' Insurance: Homeowners' insurance provides financial protection against damage to the property and liability for accidents that may occur on the premises. This cost can fluctuate per the location and value of the property, the type of coverage selected, and the insurer's policies. On average, homeowners in Ontario can expect to pay anywhere from several hundred to over a thousand dollars annually for homeowners' insurance.

This is where the help of a knowledgeable mortgage broker like myself becomes invaluable. I would be happy to guide you through the process of setting your budget and obtaining your mortgage financing. Reach out to me today, and let’s chat about your mortgage needs.

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About Andrew Thake

Andrew Thake is a seasoned mortgage broker with over 15 years of industry experience. He’s assisted more than 2,200 clients in finding their ideal mortgage solutions. Recognized for his excellence, Andrew has received high honours and awards, including the National Rookie of the Year from TD Canada Trust and recognition as a Top 10 Ottawa Mortgage Broker in 2023. He has also been inducted into the Hall of Fame at Dominion Lending Centres and has consistently received their Platinum Award during his tenure as a mortgage broker.

Andrew’s dedication lies in serving his clients and prioritizing their needs with an empathetic approach. Throughout the application process, he provides tailored, informed, and efficient services to ensure the best mortgage solutions for his client’s unique circumstances. The best part of Andrew’s job is when he gets to see the joy on his clients’ faces following their mortgage approval.

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