With all the rules and taxes surrounding land purchases, it may be difficult to know exactly how much you have to pay. Let us simplify that for you. Every province except Alberta and Saskatchewan has a land transfer tax or LTT.
In most cases, the tax is calculated based on property value, with the asking price used as an estimate of value. A percentage of this value is levied as tax, but a few other places (Toronto, for example), also have an additional municipal tax.
More on how to calculate Ontario’s LTT
Effective January 1, 2017, the tax rates on the value of the consideration are as follows:
- amounts up to and including $55,000: 0.5%
- amounts exceeding $55,000, up to and including $250,000: 1.0%
- amounts exceeding $250,000, up to and including $400,000: 1.5%
- amounts exceeding $400,000: 2.0%
- amounts exceeding $2,000,000, where the land contains one or two single family residences: 2.5%.
Toronto land transfer tax
If you are purchasing land or a property in Toronto, there is an additional municipal land transfer tax. Here are the updated rates for the Toronto municipal tax:
|Purchase Price of Home||Marginal Tax Rate|
|$55,000.01 to $250,000.00||1.0%|
|$250,000.01 to $400,000.00||1.5%|
|$400,000.01 to $2,000,000.00||2.0%|
How you can lower your tax costs when buying land in Ontario
To help individuals lower the cost of LTT, Ontario and the City of Toronto offer land transfer tax rebates for first-time homebuyers. While these tax rebates are similar, they have subtle differences that we’ll go over below:
Ontario first-time homebuyer LTT refund
According to the government website, the Ontario LTT refund is equal to the full value of the land transfer tax up to a maximum of $4,000. There are certain eligibility requirements the buyer has to meet before they can qualify for a refund:
- The buyer must be a Canadian citizen or permanent resident of Canada
- The buyer must be older than 18 years
- The buyer must occupy the home within nine months of purchase
- The buyer cannot have owned a home anywhere in the world
- The buyer’s spouse cannot have owned a home while being married to you
Based on the tax calculation, houses or land that cost up to $368,000 will receive a full refund on the land transfer tax. For property over $368,000, homebuyers will receive the maximum $4,000 refund and have to pay the remaining LTT balance.
First-time homebuyers in Toronto of new and resale homes are eligible to receive a rebate up to a maximum of $4,475.
How to get the LTT rebate in Ontario
To obtain this refund, you need to apply within 18 months after the purchase of the home. You can do so by filing the Ontario Land Transfer Tax Refund Affidavit For First‑Time Purchasers of Eligible Homes along with your Deed and Land Transfer Tax Affidavit at a Land Registry Office.