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Land transfer tax (LTT) is a provincial tax levied when someone purchases a property. If you’re buying a property in Ontario, you’re required to pay land transfer tax upon closing the transaction. Homes, residential and commercial buildings, condos, townhomes, pre-construction condos, and of course land, are all subject to land transfer tax in Ontario. Land transfer tax in Ontario is calculated as a percentage of the property value, and it must be paid upfront. Most people purchasing property in Ontario forget to consider this specific real estate tax, and this could come with surprises later on. Unless you qualify for a full rebate, there’s no way you can avoid land transfer tax in Ontario.
It is the buyer who pays land transfer tax in Ontario on the closing date of the property, never the seller. Land transfer tax is payable for every transfer of title/ownership of property into another person’s name. For instance, if a title is in a parent’s name, and they want to transfer ownership of the property to their child—the child is required to pay land transfer tax. Generally, every person or entity with a beneficial interest in land or property is liable to land transfer tax in Ontario.
Land transfer tax exemptions in Ontario include any of the following:
Land transfer between spouses.
Land transfer from the owner to a family business.
Land transfer of farming property between family members.
Land transfer tax rates in Ontario are based on the value of consideration. The following are the rates for land transfer tax in Ontario as of 2020.
Subject to certain exceptions, first-time property buyers in Ontario may receive up to $4,000 land transfer tax refund.
Up to and including $55,000- 0.5%
Over $55, 000 to $250, 000 inclusive -1.0%
Over 250,000 to $400, 000 inclusive – 1.5%
Amounts over $400, 000 up to and including $2, 000, 000 – 2.0%
Over $2, 000, 000 with land contains one or two single-family residences – 2.0%.
Assuming a property has been purchased for $300,000
$55,000 (first marginal tax bracket) x 0.50% = $275
$250, 000 (upper marginal tax bracket) - $55, 000 (lower marginal tax bracket) x 1.0%=$1,950
$300, 000( property value) - $250, 000 (lower marginal tax bracket) x 1.50% =$750
$275 + $1,950 =$750= $2,975
Total land transfer tax for the purchase of a property for $300, 000 is $2,975.
Although paying land transfer tax in Ontario is generally unavoidable, first-time homebuyers may be eligible for a land transfer tax refund.
To be eligible for a land transfer tax refund:
You must be 18 years or older.
You must be a Canadian citizen or a permanent resident of Canada.
You must intend to occupy the home within nine months of the closing date.
You may not have owned a home or had an ownership interest in a home anywhere in the world.
If you are married, your spouse must not have ever owned another property anywhere in the world during your marriage.