When purchasing property in Ontario, buyers need to be aware of the land transfer tax, a significant cost that can add thousands to your purchase price.
What is land transfer tax?
In Ontario, the land transfer tax is a fee you pay to the provincial government when you acquire real estate. It’s calculated as a percentage of the property’s purchase price and is due upon closing. Your real estate lawyer will handle the land transfer tax payment on your behalf as part of the closing process.
How is land transfer tax calculated?
Ontario’s land transfer tax payable increases as the property’s value increases. Here’s the breakdown:
- 0.5% on the first $55,000 of the purchase price
- 1% on the portion from $55,000 to $250,000
- 1.5% on the portion from $250,000 to $400,000
- 2% on the portion from $400,000 to $2,000,000
- 2.5% on the portion above $2,000,000
For example, if you purchase a home for $600,000, your land transfer tax would be calculated as:
- 0.5% of $55,000 = $275
- 1% of $195,000 (the portion between $55,000 and $250,000) = $1,950
- 1.5% of $150,000 (the portion between $250,000 and $400,000) = $2,250
- 2% of $200,000 (the portion between $400,000 and $600,000) = $4,000
Total land transfer tax = $8,475
Important to note, Toronto is currently the only municipality in Ontario that has an additional land transfer tax, so if you are purchasing in Toronto be prepared to pay that tax as well.
First-time home buyer rebate
If you’re a first-time homebuyer, you may be eligible for a rebate of up to $4,000 on the provincial land transfer tax. This rebate can significantly reduce or even eliminate your land transfer tax, depending on the price of the property.
To qualify for the rebate, you must not have owned a home anywhere in the world, and if you’re purchasing with a partner, they must also be a first-time homebuyer.
Conclusion
When you purchase real estate, other fees will come up in the closing costs. Your real estate lawyer and real estate agent should be upfront about these costs and can provide you with a breakdown of everything you can expect when you buy a property. Another closing cost is title insurance. You can read more about title insurance here.
McMurter & Associates has been practicing real estate law for Durham Region residents for over 30 years. If you have questions about land transfer tax, please reach out to your real estate lawyer who will be happy to help you.
To meet with a member of our firm, send us an email or call us at 1-800-756-7138 or 289-278-0934 to schedule a consultation.