What you need to know about land transfer tax in Ontario

What is land transfer tax?

A land transfer tax is a tax that homebuyers have to pay to the government when buying a home. In Canada, land transfer taxes fall under the control of provincial and territorial governments, so each region will have its own rules.

In Ontario (and several other provinces), the land transfer tax is not a simple percentage of your home's overall value. Rather, it’s what’s known as a marginal tax, meaning that each segment of your property's value is taxed at its corresponding marginal rate.

So, for example, you might pay .05% on the first $50,000 and then pay 1% on the amount above $50,000 up to $150,000 and so on, with the tax amount rising as your home’s value increases. The tax is charged on all different kinds of properties, including the purchase of vacant land, family homes and condominiums, as well as commercial properties, such as office buildings.The tax you’ll owe depends on the price you paid, and is one of the biggest closing costs that you’ll need to consider when deciding how much you can afford to spend on a house.

It’s important to note that some cities may also have their own land transfer taxes on top of the provincial and territorial taxes. For example, Toronto has its own municipal land transfer tax, so if you live in the city, you’d be required to pay two separate taxes: a city and a provincial land transfer tax.

Empower your investments with Qtrade

Discover Qtrade's award-winning platform and take control of your financial future. With user-friendly tools, expert insights, and low fees, investing has never been easier.

Start Trading Today

Understanding Ontario’s land transfer tax rates

So how much is land transfer tax in Ontario? Here’s how the marginal land transfer tax rate works:

• Pay 0.5% on the amount up to and including $55,000
• Pay 1% on the amount exceeding $55,000, up to and including $250,000
• Pay 1.5% on the amount exceeding $250,000, up to and including $400,000
• Pay 2% on the amount exceeding $400,000
• Pay 2.5% on amounts exceeding $2,000,000, where the land contains one or two single family residences

Calculating land transfer tax

To calculate the land transfer tax for a home in Ontario, you need to apply the marginal rates to each portion of your property's purchase price. For example, if you purchase a property for $500,000:

• First $55,000: $55,000 × 0.005 = $275
• $55,000 to $250,000: 195,000 × .01 = $1,950
• $250,000 to $400,000: 150,000 × .015 = $2,250
• $400,000 to $500,000: 100,000 × .02 =$2,000

So, for a property valued at $500,000, the LTT you would have to pay would be $6,475 ($275 + $1,950 + $2,250 + $2,000 = $6,475). Keep in mind that you may have to pay an additional amount if your city also levies a land transfer tax. Furthermore, property investors purchasing homes as an investment may be subject to additional taxes or higher rates, depending on the specific regulations in their province or municipality.

Unexpected vet bills don’t have to break the bank

Life with pets is unpredictable, but there are ways to prepare for the unexpected.

Fetch Insurance offers coverage for treatment of accidents, illnesses, prescriptions drugs, emergency care and more.

Plus, their optional wellness plan covers things like routine vet trips, grooming and training costs, if you want to give your pet the all-star treatment while you protect your bank account.

Get A Quote

Exemptions and rebates for first-time homebuyers in Ontario

First-time homebuyers in Ontario could be eligible to get a rebate of up to $4,000 on their land transfer tax. For homes with a value of $368,000 or less, this rebate would completely cover the cost of the tax. However, if the property price is more than $368,000, buyers will receive the maximum rebate of $4,000 but must pay a land transfer tax on the remaining amount. Note that your city may also offer rebates on municipal land transfer taxes. For example, Toronto homebuyers may qualify for a rebate of as much as $4,475 on their municipal land transfer taxes. Other exemptions include transfers between spouses due to separation or divorce and certain family business or farmland transfers.

Common mistakes to avoid when paying land transfer tax

Here are some potential mistakes to look out for when paying your land transfer tax in Ontario:

• Underestimating costs: Buyers often forget to consider just how much the LTT can add to the cost of a house when deciding their house-buying budget
• Not applying for rebates: First-time buyers must do their research to see what rebates may be available both provincially and for their municipality
• Ignoring municipal taxes: In Toronto and some other municipalities, additional land transfer taxes may apply
• Not checking calculations: Always double-check your calculations or use an online calculator (there are many free land transfer calculators available free online) for accuracy
• Penalties: Don’t avoid paying your land transfer tax. You could be charged a penalty for late payment

FAQs:

How much does land transfer tax cost in Ontario?

The amount of land transfer tax you’ll pay in Ontario depends on the value of your home and where you live. The province charges a marginal tax that rises as the value of your home increases. For example, you’ll pay 0.5% on the amount up to and including $55,000 and 1% on the amount exceeding $55,000, up to and including $250,000. The tax continues to increase until it reaches 2.5% on amounts exceeding $2,000,000. You could pay even more land transfer taxes depending on where you live. For instance, Toronto charges a municipal land transfer tax that starts at .05% for the first $55,000 and goes up to as much as 7.5% for homes over 20 million dollars.

How do I avoid land transfer tax in Ontario?

You can’t really avoid paying a land transfer tax in Ontario aside from some narrowly defined exceptions such as transferring property between divorced spouses, transfers involving a family business and some transfers of farmland between family members. However, if you are a first-time homebuyer, you can apply for a rebate.

Who is responsible for paying land transfer tax in Ontario?

In Ontario the person buying the home is responsible for paying the land transfer tax in the province.

Is there HST on land transfer tax in Ontario?

No, in Ontario the land transfer tax is not subject to HST.