What Is The Ontario Land Transfer Tax?

The Ontario land transfer tax (LTT) is a marginal tax that taxes each part of your property’s value at a unique rate.

This transfer is applicable when you purchase any type of real estate within the province. Its intention is to curb speculation and to encourage more sustainable development. It is also used as a means of raising revenue for the provincial government. The purchase price of your home is used to determine transfer taxes. 

First $55,000: 0.5%

$55,000.01 to $250,000.00: 1.0%

$250,000.01 to $400,000.00: 1.5%

$400,000.01 to $2,000,000.00: 2.0%

Over $2,000,000: 2.5%

What Is The Toronto Land Transfer Tax?

Each province has its own land-transfer tax rates, as do some municipalities. In Toronto, for example, buyers must also pay an additional municipal tax. The City of Toronto charges an additional municipal land transfer tax when you purchase a home in the city. The land transfer tax applies within the following limits: Steeles Avenue as the north boundary, Etobicoke as the west boundary, Scarborough as the east boundary, and Lake Ontario as the south boundary. When you acquire a property in Toronto, you are subject to this and the provincial land transfer tax, which are payable at closing.

The following is Toronto’s tiered Land Transfer Tax system, which determines its tax percentage based on the range a value of a given property lands within.

First $55,000: 0.5%

$55,000.01 to $250,000.00: 1.0%

$250,000.01 to $400,000.00: 1.5%

$400,000.01 to $2,000,000.00: 2.0%

Over $2,000,000: 2.5%

It’s essentially the same thresholds and tax rates set out by the provincial government, except both must be paid as a final total.

This however, only applies to the designated municipal limits of the City of Toronto, and does not affect homebuyers in neighbouring regions. For example, when purchasing a home in Vaughan, there is no municipal transfer tax to pay. This represents immediate cost savings when purchasing in Vaughan, just outside of the Toronto limits.

LTT for First-time Homebuyers

For first-time homebuyers, the Ontario land transfer tax has a maximum $4,000 tax credit. This refund will cover the full tax for properties up to $368,000, based on Ontario’s land transfer tax rates. For homes valued at more than $368,000, buyers will get the full $4,000 rebate and pay down any remaining LTT balance.

When registering the land transfer papers and paying their taxes, taxpayers may receive an immediate refund. Rebate applications are available online for home purchasers registering electronically or on paper at government office locations.

If the rebate isn’t claimed at registration, the full tax is paid and a refund claim may be submitted to the Ministry of Finance within 18 months.

There are also several requirements which must be met in order to qualify for this incentive. This includes the following.

• You are a Canadian citizen or a permanent resident of Canada.
• You are 18 years of age or older.
• You will occupy the property within 9 months of its purchase.
• You have not owned a home or interest in a home anywhere else.
• Your spouse has not owned a home while being your spouse (they may be a previous home owner).
• If the property is newly built, it is eligible for home warranty.

If you’re not sure whether you qualify for the first-time home buyer’s incentive, consider getting in touch with a lawyer.

If you are interested in purchasing property within Ontario, it is likely that you will have to pay a provincial land-transfer tax. In addition to the provincial land transfer tax, many regions, such as Toronto, now charge their own form of municipal or regional transfer taxes as well. It is important that you determine if you will have to pay municipal transfer taxes in addition to the provincial land transfer tax, or if your region charges its own form of regional land transfer tax. It is strongly advised that you consult a lawyer when purchasing property so that they can assist you with avoiding any potential pitfalls such as being unaware of any land transfer taxes that you might be responsible for.