When you are purchasing a home in Ontario, you will be subject to paying a land transfer tax. While you’re land transfer tax is one of your closing costs that should be accounted for prior to looking for a home, the reality is that many first-time home buyers and even seasoned home buyers are not aware that they have to pay land transfer tax until the closing date of the property. If you aren’t prepared in advance, this could leave you scrambling at the last minute trying to come up with the funds to pay the land transfer tax at the last minute.
As a buyer it is relatively easy to be prepared for the cost of your land transfer tax in advance. We’re going to break down all of the ins and outs below, but if you prefer a simpler method, you can easily click on our land transfer tax calculator to find out how much you have to pay.
How is land transfer tax is calculated?
Land transfer tax is calculated as a tiered percentage based upon the purchase price of your home. There are minor variations in land transfer taxes depending on where you live. For instance there’s a double land transfer tax in the City of Toronto. The charts below outline how land transfer tax is calculated.
Ontario Land Transfer Tax
- 0.5% of the value of the property up to and including $55,000
- 1% of the value which exceeds $55,000 up to and including $250,000
- 1.5% of the value which exceeds $250,000 up to and including $400,000
- 2% of the value between $400,000 and $2,000,000
- 2.5% for amounts exceeding $2,000,000, where the land contains one or two single family residences
Toronto Land Transfer Tax
0.5% up to and including the first $55,000
1% of the value which exceeds $55,000 up to and including $250,000
1.5% of the value between $250,000 and $400,000
2% of the value between $400,000 and $2,000,000
2.5% of the value over $2,000,000
*Just so there’s no confusion, if you are purchasing a home in Toronto you have to pay both the Toronto land transfer tax, as well as the Ontario land transfer tax.
If you are a first time home buyer, you are eligible for a land transfer tax rebate of up to $4,000. In order to apply, the following criteria must be met:
- You must be a Canadian citizen or permanent resident of Canada,
- You must be 18 years of age or older,
- You must live in the home within 9 months of purchasing it,
- You cannot have owned a home before, and
- If you have a spouse, they cannot have owned a home during the time they have been your spouse.
* While you would have to be paying double the land transfer tax when purchasing a home in Toronto, as a first time home buyer you are eligible for an additional rebate of up to $4,475.00.
One of the above criteria that often gets overlooked is the fact that you cannot have previously owner a home. Also, your spouse cannot have owned a home during the time that you have been common law partners or married. This is a common misconception for people who are purchasing a house where one of the parties is a first-time home buyer.
In the event that your head isn’t already spinning in circles from all of this information, you could read the land transfer tax act OR jump right into our calculator to find out how much land transfer tax you would have to pay on the purchase of your home.