What is Land Transfer Tax in Ontario?
Homebuyers must pay the Ontario Land Transfer Tax when purchasing real estate in Ontario. Generally, this is one of the highest closing costs. It applies to all properties, including land, homes, condos, and commercial buildings. This amount of tax payable to the government varies depending on the property’s purchase price.
It’s important for homebuyers to factor in the cost of this tax when budgeting for their new home. It can be a significant expense, and failing to account for it can lead to unexpected costs and financial stress. You can use the Ontario Land Transfer Tax calculator to estimate the amount of tax payable.
How Ontario Land Transfer Tax is Calculated
As mentioned above, the amount you owe is calculated as a percentage of the property’s purchase price. There are specific marginal tax rates applied to each portion of your home’s value:
- 0.5% for the first $55,000
- 1.0% for the amount from $55,000 to $250,000
- 1.5% for the amount from $250,000 to $400,000
- 2.0% for the amount from $400,000 to $2,000,000
- 2.5% for amounts over $2,000,000
Use the above rates in your calculations. For example, if you purchase a property for $500,000, the breakdown is as follows:
- First $55,000: 55,000 x 0.5% = $275
- $55,000 to $250,000: 195,000 x 1.0% = $1,950
- $250,000 to $400,000: 150,000 x 1.5% = $2,250
- $400,000 to $500,000: 100,000 x 2.0% = $2,000
Add each tax amount. In this example, you’d pay $6,475 in taxes for your $500,000 property in Ontario.
For quick and easy calculations, input your purchase price into our Ontario Land Transfer Tax Calculator.
Ontario Land Transfer Tax Calculator
Factors Affecting the Tax Amount
The tax you pay when buying a property depends on several factors. The most significant, as mentioned earlier, is the purchase price — the more expensive the real estate, the higher your tax rates. In addition to the purchase price, other factors can impact the amount, including the following:
- Property Location: The tax rate for Ontario is the same across the province. However, in some municipalities, there may be an additional tax which you must add to the provincial one. For example, Toronto has a separate municipal land transfer tax (MLTT).
- Buyer Status: Certain types of buyers, like first-time homebuyers, may qualify for rebates or exemptions.
- Purchase Date: The tax rate is subject to change. In the past, there have been temporary reductions or increases. If you’re planning on purchasing a property, it’s essential to be aware of current rates and any upcoming changes that may affect your closing costs.
Toronto Land transfer Tax Calculator
Toronto residential properties post Feb. 1, 2008 -
All properties with a closing date on or after February 1, 2008 you will be required to pay the Toronto Land divansfer Tax.
Exemptions and Rebates
Most homebuyers must pay the Ontario Land Transfer Tax. However, there are some exemptions and rebates available to certain types of buyers:
- First-time homebuyers: Those purchasing a home for the first time may qualify for a rebate of up to $4,000. This applies to properties with a value greater than $368,000.
- Transfer between spouses: If spouses separate or divorce, they may be able to transfer their property without paying the tax. However, these exemptions are limited.
- Transfers from an individual to their family business: A tax exemption may apply if you operate a business as an individual and want to transfer the property to your family business corporation.
- Farmland transfer between family members: This exemption has different requirements, which depend on the type of transfer (between individuals or family farm corporations).
How to Pay the Land Transfer Tax
You must pay the amount as soon as you take possession of the property — most buyers pay it at the same time as closing. Your lawyer will arrange for this payment to the government once the deed transfers to your name.
Impacts on the Overall Cost of Buying a Home
In short, land transfer taxes can significantly impact the overall cost of buying a home. As discussed earlier, the more expensive the property, the more tax you’ll pay. It’s also essential to consider other closing costs, such as legal, appraisal, and home inspection fees, which can add up when it comes time to complete a deal.
While some rebates and exemptions exist, it’s important to research all the closing costs applicable to your location to budget accordingly.
Frequently Asked Questions
This depends on the purchase price. Different marginal tax rates apply to specified portions of the property’s value. The more expensive the real estate, the more tax you’ll pay. Refer to the “How Ontario Land Transfer Tax is Calculated” section for details on tax rates.
In Ontario, it’s the buyer’s responsibility to pay the land transfer tax. You must pay this amount in full before registering the title transfer with the province.
You must pay the Ontario Land Transfer Tax at the time of closing, which is the point at which ownership of the property officially transfers from the seller to the buyer. Again, you must pay this before registering the title transfer with the province.
You can’t include the land transfer tax in your mortgage when purchasing a property. This tax is considered a separate, one-time expense that must be paid in full at the time of closing.
If it’s not paid on time, it can delay the registration of the title transfer, meaning that ownership of the property cannot officially transfer to you as the buyer. If the transfer is not registered within 30 days of closing, you must submit your tax payment and a “Return Acquisition of a Beneficial Interest in Land” form to the Ministry of Finance.