When you buy a property, whether it’s a house, land, or condo, you are subject to a land transfer tax. This tax is calculated as a percentage of the total purchase price and is paid by the purchaser at the time of closing. In some cases, the vendor may agree to pay this tax on your behalf but, ultimately, it is up to the buyer to pay this fee.
In this blog post, we will outline everything you need to know about the land transfer tax including who pays it, how it’s calculated, and what exemptions are available.
Note: The Land Transfer Tax is a one-time payment, unlike property taxes which are paid annually. Land Transfer Taxes CAN NOT be added to your mortgage. You will need to pay the land transfer tax at the time of closing.
Land Transfer Tax Calculator
Who Pays the Land Transfer Tax?
As we mentioned above, the land transfer tax is paid by the purchaser at the time of closing. In some cases, the vendor may agree to cover this cost but it is ultimately the responsibility of the buyer.
If you are buying a property with someone else, each person is responsible for paying their own share of the tax. For example, if you are buying a property with your spouse and you are each putting down 50% of the purchase price, you will each be responsible for paying 50% of the land transfer tax.
Calculating The Land Transfer Tax
The amount of land transfer tax you pay is based on the total purchase price of the property. The tax rate varies from province to province but is generally between 0.5% and 2%.
For example, let’s say you are buying a house for $300,000. The provincial land transfer tax rate in Ontario is 1.5%. To calculate the amount of tax you would need to pay, simply multiply $300,000 by 1.5% which would equal $4,500.
Exemptions From Paying The Land Transfer Tax
First-time homebuyers may be eligible for a rebate on their land transfer tax. In order to qualify for this rebate, you must meet all of the following criteria:
-The property must be located in Ontario -You must be at least 18 years old -You cannot have owned any other homes before (either jointly or individually) -The home must be your principal residence within 9 months from date of registration If you do qualify for this rebate, you may be eligible for a refund of up to $4,000 which would effectively exempt you from having to pay any land transfer tax at all.
Some other provinces offer similar programs for first-time homebuyers so be sure to check with your local government to see if you qualify for any rebates or exemptions in your area.
How Is the Land Transfer Tax Calculated?
The amount of land transfer tax you’ll pay depends on the value of your home and which province you live in.
For example, in Ontario, the tax is calculated as follows:
– 0.5% on the first $55,000
– 1% on the portion from $55,000-$250,000
– 2% on any remaining value above $250,000
For a home with a purchase price of $300,000, this works out to a land transfer tax of $2,475.
In Toronto, there is an additional Municipal Land Transfer Tax (MLTT) that ranges from 0.5% to 2.5%, depending on the value of your home. For a home with a purchase price of $300,000 in Toronto, this would work out to an additional MLTT of $3,725 for a total land transfer tax of $6200.
Conclusion:
The land transfer tax can be a significant expense when buying a property but there are some exemptions available – particularly for first-time homebuyers. Be sure to do your research ahead of time so that there are no surprises at closing time!
