Land transfer tax in Ontario is a one-time fee that is payable by the buyer when they purchase a property. The amount of the tax depends on the purchase price of the property and location. Here’s an overview of how it works:
Ontario Land Transfer Tax (LTT)
The provincial land transfer tax is calculated based on the following sliding scale:
- 0.5% for the first amounts up to and including $55,000
- 1% for amounts exceeding $55,000 to $250,000
- 1.5% for amounts exceeding $250,000, up to and including $400,000
- 2.0% amounts exceeding $400,000 to $2,000,000
- 2.5% for amounts exceeding $2,000,000, where the land contains one or two single family residences
Example of Calculation
For a property purchased for $500,000, the LTT would be calculated as:
- 0.5% on the first $55,000 = $275
- 1.0% on the next $195,000 ($250,000 – $55,000) = $1,950
- 1.5% on the remaining $250,000 ($500,000 – $250,000) = $3,750
Total Land Transfer Tax: $275 + $1,950 + $3,750 = $5,975
First-Time Home Buyer Refund
Ontario offers a first-time homebuyer refund on the land transfer tax, which provides up to a $4,000 refund if the property is your first home and you meet the eligibility requirements. This can significantly reduce the tax for many first-time buyers.
To be eligible for the refund, the following conditions apply:
- You or your spouse must not have owned a home before.
- You must be at least 18 years old.
- The home you buy must be in Ontario.
- The home must be used as your primary residence within 9 months of purchasing.
Municipal Land Transfer Tax (Toronto)
If you’re purchasing property in Toronto, there is an additional municipal land transfer tax (MLTT), which is separate from the provincial tax. The municipal tax is calculated as follows:
- 0.5% on the first $55,000
- 1.0% on the portion between $55,000 and $250,000
- 1.5% on the portion above $250,000
Thus, a property purchased for $500,000 in Toronto would be subject to both provincial and municipal land transfer taxes, doubling the amount of tax.
Land Transfer Tax for Non-Residents
There is also an additional Non-Resident Speculation Tax (NRST) for foreign buyers purchasing residential properties in Ontario. The NRST is an additional 20% on the purchase price of residential properties in certain areas (primarily the Greater Golden Horseshoe area), and it applies to individuals who are not Canadian citizens or permanent residents.
Important Considerations
Tax Rebates: First-time homebuyers may qualify for tax rebates, and the amount can vary based on the region.
Closing Costs: Land transfer tax is one of the largest closing costs, so it’s essential to budget for it when planning to buy property.
If you need a more specific breakdown of a situation or are dealing with particular types of properties, feel free to ask!