One of the most considerable closing costs when purchasing a home is the Ontario Land Transfer Tax. This tax is a cost you may not be familiar with if you are a first-time homebuyer. When purchasing a home and property, there is a tax fee associated after the close of the transaction. This tax goes towards the province and depends on the value of your property and the amount paid for the land. It could be the most significant cost associated with your closing. The Ontario Land Transfer Tax will apply to all conveyances of land and property in Ontario. If you live in Toronto, you will also incur an additional tax along with the Ontario Land Transfer Tax, which is Toronto’s  Municipal Land Transfer Tax.

In some instances, both Ontario and Toronto Municipal Land Transfer Taxes are centered on the fair market value of the vacant land. Examples of this would be:

• The transfer of a lease with a remaining term that can exceed 50 years.
• The transfer of land from a corporation to one of its shareholders.
• The transfer of land to a corporation if the shares of the corporation are issued.

If you are a first-time homebuyer, you might be eligible to save in government-sponsored rebates, which in turn will reduce the charge of land transfer fees. This rebate will vary depending on where you purchase your property.

Ontario Land Transfer Tax

If you are purchasing a property in Ontario, you are subject to pay the Ontario Land Transfer Tax. The tax is payable upon the registered transfer of the title of the land.  

Below is the updated Ontario Land Transfer Tax rates as of 2017:

If you are a first-time homebuyer in Ontario, you are entitled to a Land Transfer Tax reduction by $4,000.00 on closing. Your eligibility is based on the following:

1. The buyer must be a Canadian citizen or permanent resident of Canada.
2. The buyer must be older than 18 years of age.
3. The buyer must occupy the home within nine months of transfer of title to the buyers.
4. The buyer cannot have owned a home before in Canada or anywhere else in the world.
5. The buyer’s spouse cannot have owned a home during the course of the marriage.

To obtain this refund, the purchaser will need to apply within 18 months after purchasing the property.

Municipal Land Transfer Tax for Toronto

If you are purchasing a property in Toronto, you will be required to pay the Municipal Land Transfer Tax in addition to the Ontario Land Transfer Tax. First introduced in 2007 and implemented in 2008, it is now a large part of the city’s budget. The boundaries for this tax apply to Steeles Avenue at the North border, Etobicoke at the west border, Scarborough at the East border, and Lake Ontario at the South border.

If you are a first-time buyer in Toronto, the Municipal Land Transfer Tax will reduce by a maximum of $4,475.00 on closing. Your eligibility for this is based on the following:

1. The buyer must be a Canadian citizen or permanent resident of Canada.
2. The buyer must be older than 18 years of age.
3. The buyer must occupy the home within nine months of purchase.
4. The buyer cannot have owned a home before in Canada or anywhere else in the world.
5. The buyer’s spouse cannot have owned a home during the course of the marriage.

The Ontario Land Transfer Tax and the Municipal Land Transfer Tax will be payable on closing. If you are uncertain whether you qualify for the First Time Home Buyer rebate in Ontario or in Toronto respectively, contact a lawyer.

If you have any questions regarding the Ontario Land Transfer Tax and the Toronto Municipal Land Transfer Tax, please feel free to contact Ashley Almeida, real estate lawyer at Woitzik Polsinelli LLP Lawyers and Mediators at ashleydurhamlawyer.ca or 289-220-3235.

“This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique, and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.”