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Land Transfer Taxes planning

08.20.2021

Everything You Need To Know About Land Transfer Taxes

Buying

When the discussion about buying a home arises, most people tend to really only focus on one thing: the final sales price. The questions “What did you pay?,” and “How much did it go for?” are most frequently repeated when real estate transactions are being talked about, but having enough to pay for a home’s list price alone isn’t enough to land you a new home.

The lesser discussed, often forgotten about secondary and tertiary costs of buying a home are equally important to consider, as the success of real estate deals depend on them being paid.

One of the biggest culprits when it comes to overlooked costs is often the Land Transfer Tax, which in cities like Toronto are even more important and complex than places elsewhere.

So, if you’re thinking about buying a home for the first time, or just need a refresher on what exactly the Land Transfer Tax is and what it’s used for, this post is here to help.

What Is Land Transfer Tax?

In Canada, the Land Transfer Tax is a fee homebuyers are required to pay to their individual provincial governments when completing the purchase of a new home. Apart from Saskatchewan and Alberta, all other Canadian provinces require homebuyers to pay this additional charge when they buy a new property.

You can think of this real estate fee as buying permission from your provincial government for you to transfer the title of a new property under their jurisdiction into your name.

While that might not sound like a fantastic reason for having to pay an extra fee when making what is sure to be one of the biggest purchases of your life, it’s essentially a nationwide requirement that homebuyers can’t avoid. Unless, of course, you’re buying a home in Saskatchewan or Alberta.


Expand your knowledge about the financial side of real estate by clicking on any of the informative buyer-specific links here:


How Much Is Land Transfer Tax?

The cost of Land Transfer Tax varies on a few things. For starters, every individual province across Canada has its own pre-determined set of Land Transfer Tax rates. Secondly, those rates change depending on the final sales price of your new property.

Across all provinces, Land Transfer Tax rates increase at different increments as the overall price of your new home does. The more you end up paying for your new home, the more your Land Transfer Tax rates increase too.

Already have a place in mind? Learn more about what you’ll have to pay in Land Transfer Taxes by using my Home Purchase Calculator here.

Most provinces’ Land Transfer Tax rates increase between 0.5% to 2.5% of the final sales price of your new home. In Ontario, the rates increase in relation to the overall purchase price of a home like this:

  • The First $55,000 — 0.5%
  • $55,000.01 and $250,000.00 — 1%
  • $250,000.01 and $400,000.00 — 1.5%
  • $400,000.01 to $2,000,000.00 — 2%
  • Anything Exceeding $2,000,000 — 2.5%

However, if you happen to be buying a home within the City of Toronto, you must also pay a Municipal Land Transfer Tax in addition to the provincial tax.

These Toronto Land Transfer Tax rates follow the exact same structure as the Ontario rates, which in effect essentially means homebuyers must pay double the Land Transfer Taxes when buying property in Toronto.

Eager to make your mark on the Toronto real estate market? Start by checking out The Latest Toronto Listings here.

Who Pays Land Transfer Tax?

As you might have expected, the selling party within a real estate transaction isn’t required to pay for any Land Transfer Taxes — the responsibility is solely on the buying party.

No matter if a homebuyer is purchasing a resale property or is the first owner of a brand new pre-construction development property, they must foot the bill for their applicable Land Transfer Tax rates.

Do you know the differences between buying resale properties and pre-construction properties? You might find one type of transaction suits your lifestyle much better than others. Learn more by reading my blog post Resale Condos VS. Pre-Construction: Which Is Right For You?

What About First-Time Buyer Refunds?

However, there’s one demographic of homebuyers that aren’t required to pay for Land Transfer Taxes — or at least, not in full. Most first-time homebuyers are eligible for full or partial refunds on both their provincial and municipal Land Transfer Taxes, should they meet the necessary requirements. These first-time buyer refund criteria dictate that buyers:

  • Must be a Canadian citizen or permanent resident of Canada
  • Be older than 18 years
  • Occupy the home within nine months of purchase
  • Cannot have owned a home anywhere in the world
  • Spouses cannot have owned a home while being your spouse

Should a first-time buyer meet all of these requirements, then they’ll be eligible for either a full refund of their Land Transfer Tax or up to a maximum of $4,000.

*Note: If you’re a first-time homebuyer and want to process a request for a Land Transfer Tax refund, it must be made within 18 months after the date of the transfer unless you risk missing out on your refund completely.

You might be eligible for other rebates and refunds when buying a home. Reading my blog post here to find out if you apply: Buying A Pre-Construction Property? Here’s How The HST Rebate And NRRP Rebate Work

How Do I Pay The Land Transfer Tax?

As a buyer in Ontario, you must pay the Land Transfer Tax directly to the province when the official title transfer of your new property is registered in your name.

How this is facilitated exactly is usually taken care of by both your Realtor® and real estate lawyer, who sign and submit most of the official paperwork in a real estate transaction on your behalf.

However, some buyers aren’t required to pay the Land Transfer Tax should the transfer of their title be under certain conditions. Those conditions include certain transfers:

  • Between spouses
  • From an individual to his or her family business corporation
  • Of farmed land between family members
  • Of a life lease from a non‑profit organization or a charity

Otherwise, the payment of a Land Transfer Tax should always be factored into your total costs for buying a home, especially as they effectively double for homebuyers in Toronto.


Ready to go one step closer to making your Toronto home buying dreams a reality? Let these useful buyers’ resources help you get where you want to be.


 

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