Land Transfer Taxes: What Every Home Buyer Should Know

The purchase of a home is a truly joyous occasion. Covering closing costs? Not so much. While some of these expenses (like the deposit you pay upfront) will be easy to understand, others may be a little trickier to wrap your head around. Land transfer taxes, in particular, are a common source of confusion. Many buyers are unsure of what they are, how they’re calculated, and what they mean for a home purchase.

If you’re preparing to buy property in Toronto, here’s what you should know about land transfer taxes…

What are land transfer taxes?

When property changes hands in this city, land transfer taxes apply. Every home buyer in Toronto has to pay them—at both the provincial and municipal levels. They’re calculated as percentages of your purchase price, so the amount you’ll cover will depend on the value of your prospective home.

We’re talking about taxes levied by the government, allocated towards local social services. It’s worth noting that every province in Canada charges some form of land transfer tax, so it’s not unique to our corner of the world. That said, the amount a buyer is charged depends on where they are in the country. Here’s what you can expect in Toronto.

How much is land transfer tax in Ontario?

Ontario and Toronto land transfer taxes are calculated on a sliding scale. For the vast majority of homes in the city, buyers pay 2 or 2.5 per cent of their purchase price for each tax. Here’s a detailed breakdown.

• 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

This scale applies to both taxes (provincial and municipal), so you’ll have to pay double if you’re buying in Toronto. If you’re purchasing in an area that lies outside of the city’s boundaries, you’ll only be responsible for the provincial tax.

Will rebates apply?

There’s some good news for first-time buyers. If you’ve never purchased a home before, you can receive a rebate of up to $4000 on your provincial land transfer tax. If you register in person, you can claim the amount you’re entitled to at the same time. You can also do so electronically through the Minister of Finance. This is where a good real estate lawyer comes into play.

First-timers can also apply for a rebate on their municipal land transfer tax, with a maximum of $4,475. For both the Ontario and Toronto taxes, you can qualify even if you have a spouse who doesn’t—it just means you’ll only get 50% of your rebates.

The bottom line

Closing costs are an annoying part of purchasing a home, especially when you don’t fully understand them. For many buyers, land transfer taxes can be especially confusing.

To help ensure a smooth purchase, make sure to plan for all closing costs—from land transfer taxes to legal fees to moving expenses. If you have any questions, ask your real estate agent. They’ll know the process inside and out, and they can even refer you to a helpful legal or financial expert if need be.

Ready to start the search for your next home? Get in touch to learn how we can help ensure your purchase is a success!