When it’s time to buy a property, most people tend to really only focus on one thing: the sale price. But there’s more to it than that: a number of other costs have to be factored in, too, including land transfer taxes, which can really add to the final cost of a property (especially in Toronto, where you pay a provincial tax AND a municipal one…lucky us).
What are land transfer taxes?
It’s a fee homebuyers pay when they purchase a property. Apart from Saskatchewan and Alberta, all provinces in Canada have one. Basically, you can think of the fee as buying permission from your provincial government to transfer the title of a new property under their jurisdiction into your name. While that might not sound like a fantastic reason to tack thousands of dollars onto an already huge purchase, you can’t avoid it. (You know what they say about death and taxes, right?)
How much is the Ontario land transfer tax?
It’s calculated as a series of percentages of the sale price. The more you pay for the property, the more you pay in taxes. Here’s how it works in Ontario:
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%
If you’re buying in the City of Toronto, you pay those rates again for your municipal land taxes as well. In effect, what you pay doubles. It’s the cost of living in the 416: if you’re buying in Mississauga or Richmond Hill (or anywhere else outside the City of Toronto), you’re only on the hook for the provincial tax.
Read more: Don’t get surprised by closing costs
Who pays the land transfer tax?
The buyer is on the hook for all taxes.
What if I’m a first-time buyer – do I get any deals?
Yes. You’re probably eligible for full or partial refunds on your provincial and municipal taxes, as long as you meet these requirements:
You’re a Canadian citizen or permanent resident of Canada
You’re over 18
You occupy the home within 9 months of buying it
You’ve never owned a home anywhere in the world
Your spouse has also never owned a home (while they have been your spouse)
If you check all those boxes, you’ll be eligible for a refund of up to $4,000 for each tax.
*Note: You must request your refund within 18 months of the transfer, or you could miss out on it.
How do I pay the land transfer tax?
You pay it directly to the province/municipality once the official title transfer of your new property is registered in your name. IT’s something your REALTOR and real estate lawyer will take care of.
Are there any exceptions?
There are a few – they apply to transfers:
Between spouses
From an individual to their family business corporation
Farmed land between family members
Life lease from a non‑profit organization or a charity
Otherwise, you should always factor land transfer taxes into the total costs of buying a property.
A version of this post was originally published on cameronmiller.com and has been used with permission.