Toronto Land Transfer Tax

Both Ontario and Toronto impose land transfer taxes on real estate transactions within their jurisdictions.  These taxes are paid by the purchaser at the time of property registration or, if not registered, within 30 days of the purchase. In general, “land” in this context means the actual land, the sale of buildings, and the potential construction of buildings and fixtures.  There are other rules for rebates and exemptions that are briefly covered below.  The purchaser should consult with a qualified real estate attorney, if there any concerns about liability for the tax.

The following table illustrates Land Transfer Taxes for Ontario:

Up to $55,000 x .5% of total property value
From $55,000 to $250,000, x 1% of total property value
From $250,000 to $400,000, x 1.5% of total property value
From $400,000 up x 2% of total property value for land that contains at least one and not more than two single family residences.

Also, a rebate is available from the Ontario provincial government for first-time homebuyers up to $2,000 (equivalent to the land transfer taxes payable on a home sale of $227,500).

City Of Toronto Buyers Only

Effective February 1, 2008, if you are a buyer in the City of Toronto (416 area code - does not affect buyers in the 905 area code), you will be subject to an additional City of Toronto Land Transfer Tax for any real estate purchase made in 2008 onwards. There is, however, an exemption for first-time buyers purchasing residential real estate up to a purchase price of $400,000. The additional City of Toronto tax is calculated as follows:

• One-half of 1% of the value of the consideration for the conveyance up to and including $55,000
• 1% of the value of the consideration which exceeds $55,000 up to and including $400,000
• 1.5% of the value of the consideration which exceeds $400,000 up to and including $40 million
• 1% of the value of the consideration which exceeds $40 million
• If the value of the consideration for the conveyance exceeds $400,000 and the conveyance is a conveyance of land that contains at least one and not more than two family residences, an additional tax of:
•one-half of 1% of the amount by which the value of the consideration exceeds $400,000 up to and including $40 million;
• and 1% of the amount by which the value of the consideration exceeds $40 million

Similar, but in addition to, the provincial government rebate program is a a rebate is available from the City of Toronto for first-time homebuyers up to $3,725 (equivalent to the land transfer taxes payable on a home sale of $400,000).

Are You a First-Time Homebuyer?

You can qualify as a first-time homeowner, if you meet the following criteria.

  • The purchaser must be at least 18 years of age.
  • The purchaser must occupy the home as his or her principal residence no later than nine months after the date of the conveyance or disposition.
  • The purchaser cannot have previously owned a home, or had any ownership
    interest in a home, anywhere in the world, at any time.
  • If the purchaser has a spouse, the spouse cannot have owned a home, or had any ownership interest in a home, anywhere in the world while he or she was the purchaser’s spouse. If this is the case, NO refund is available to either spouse. Note: If a purchaser’s spouse owned an interest in a home BEFORE becoming the purchaser’s spouse, but not while the purchaser’s spouse, the purchaser may be eligible for some rebate.

What the Land Transfer Tax Means to You

Anytime a government imposes a tax on a product or service, the transaction price for that product or service is going to rise.  Who ends up paying the real cost of that tax (i.e., buyer or seller, or more likely, both) is a matter of negotiation between the parties as to the selling price.  Of course, legally, the purchaser pays the tax, but the parties can work that into the price negotiation, and the seller may be agreeable to lower the selling price a tick in order to provide the buyer with some additional cash to cover the tax.

General market conditions may have more of an effect on the sales price, but it’s difficult to say without a detailed economic study of what has affected housing prices since the imposition of the Ontario land transfer tax, and then the additional land transfer tax levied by Toronto.  Bottom line, however, is these taxes are probably here to stay, and they have to be considered like any other closing cost.  So, my main piece of advice is to double-check that you are paying the correct percentage tax for your transaction.  Ensure that you understand the few exemptions that may be available for special situations, and the potential for a rebate from Toronto, if you are a first-time homebuyer. 

The other potential tax liability that you should be aware of is called the “Harmonized Sales Tax” (HST). The HST is a combined Federal goods and services tax and a provincial tax that is imposed on newly constructed homes and professional real estate services.  It is not applicable to the resale of existing homes.  However, the provincial government will provide a 75% rebate to the purchaser of the tax, up to $24,000.  Also, the federal government will offer some modest rebates for low-income adults and children in a family.  Again, if you are considering purchasing a new home, you should consult a professional (attorney or accountant) to ensure you understand what the net HST liability you will incur on a new construction transaction.

HomeLife/Response
Realty Inc. Brokerage
Independently Owned and Operated

Andrew Dawid

Sales Representative

(416) 917-0653

info@condosdowntowntoronto.net

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