Ontario Land Transfer Tax
Ontario Land Transfer Tax When Purchasing a Property
Are you in the market for a new property? If so, you’ll want to be aware of land transfer taxes. This is a tax that is charged by the government when property changes hands. It’s important to know how much this tax will cost you and whether or not you’re exempt from it. In this blog post, we will discuss land transfer tax in detail and answer some common questions about it. Contact us today to speak with a real estate lawyer who can help you and your family members navigate these waters!
What is Provincial Land Transfer Tax?
Land Transfer Tax is a tax that is charged by the government when property changes hands. The amount of tax you pay will depend on the property value. In most cases, land transfer tax is calculated as a percentage of the purchase price. For example, if you’re buying a $500,000 home, your land transfer tax would be $5000.
It is overlooked by many home buyers but land transfer tax can be a significant amount of money. It is important to factor this cost into your budget when you are purchasing a property.
What is included in the Land Transfer Tax?
Any purchase of land or an interest in land is subject to land transfer tax. This includes the purchase of single family residences, cottages, vacant lands, rental properties, or commercial properties. New builds are also subject to land transfer tax. The land transfer tax is calculated based on the property value and not on the down payment or mortgage amount.
Who Pays Land Transfer Tax?
In Ontario, the general rule is that the purchaser of the property is responsible for paying land transfer tax. There are some exceptions to this rule, such as if the property is being transferred as a gift. In this case, the donor would be responsible for paying the land transfer tax.
When do you the Pay Land Transfer Tax?
Land transfer tax is paid at the time of closing. This means that the lawyer will provide the breakdown of all the closing costs to you and land transfer tax will be one of those costs. The real estate lawyer will prepare the land transfer tax forms on your behalf. The mortgage proceeds will not cover the land transfer tax and it is up to the client to provide the funds to pay for the land transfer tax, usually by way of a bank draft or certified cheque. Your real estate lawyer will make arrangements for the land transfer tax to be paid on the closing day.
Are you a First Time Home Buyer?
First time homebuyers in Ontario may be exempt from land transfer tax. To qualify for the first time homebuyers rebate, you must meet all of the following criteria:
- The purchaser must be 18 years old
- The property must be your principal residence within nine months of the date of transfer
- You must be a Canadian citizen or permanent resident.
- You cannot have previously owned a home, or an interest in a home, anywhere in the world.
- If the purchaser has a spouse, they also cannot have owned a home or had an interest in a home during the time they were married.
What is the total land transfer tax refund?
The land transfer tax refund is worth a maximum of $4000. This is a refundable tax credit, which means that if the total land transfer tax you owe is less than $4000, you will receive a refund for the difference. If multiple people are buying the property together, the maximum amount will be reduced in accordance with their interest in the property. For example, if two people are buying a property together and each owns 50% of the property, the maximum land transfer tax refund they would be eligible for would be $2000 each.
Why is there an additional land transfer tax Toronto?
In addition to the provincial land transfer tax, when a home is purchased in Toronto, a municipal land transfer tax is applied. As a result, home buyers purchasing in Toronto are charged additional LTT.
If you are a first time homebuyer in Toronto, you may be eligible for land transfer tax rebates of up to $4475 from the City of Toronto land transfer tax. This rebate is in addition to the provincial land transfer tax rebate.
If the buyer becomes a Canadian citizen or permanent resident within 18 months of the transfer, they may apply for and qualify for the land transfer tax rebate.
How is Land Transfer Tax Calculated?
Land transfer tax is calculated on the value of the property being purchased. The tax rates vary depending on the province or territory in which the property is located. In Ontario, for example, the land transfer tax rates in accordance with the purchase price are typically calculated as follows:
Municipal land transfer tax is similarly calculated. When calculating land transfer tax, use the https://www.ratehub.ca/land-transfer-tax land transfer tax calculator.
Non-Resident Speculation Tax (NRST)
As of March 30, 2022, the NRST rate was increased to 20% and expanded provincewide. The NRST may apply to the purchase of an interest or residential property that is located in Ontario by individuals who are not Canadian citizens or permanent residents of Canada, foreign national, foreign corporations, or taxable trustees. The NRST is an additional tax to the land transfer tax. Prior to March 30, 2022, the NRST was only charged in the Greater Golden Horseshoe region at a rate of 15%.
If there is a transfer between parent and child, does Land Transfer Tax apply?
Land transfer tax is applicable if there is a transfer of ownership between a parent and child. If the child is receiving the property as a gift, land transfer tax may be waived if the child occupies the property as their principal residence. No money should be paid for the property in order for land transfer tax to be waived and there should not be a mortgage registered on the property. These conditions must be met in order for the land transfer tax to be waived.
Land Transfer Tax Between Spouses?
Land transfer taxes are not payable on transfers between spouses, regardless of whether they are separating or not. However, if the property is transferred from one spouse to the other as part of a divorce settlement, land transfer tax may be payable.
Contact A Real Estate Lawyer
If you have any questions about whether land transfer tax is payable in your situation, contact us for a consultation.