Land Transfer Tax - Simple Closings

When you acquire land or a beneficial interest in land in Canada (except Alberta and Saskatchewan), whether it be a house, condo or land, you are subject to land transfer tax. Land transfer tax is calculated based on the amount of consideration paid for the property.

There are exceptions, when land transfer tax is based off the fair market value of the property:

Transfer of a lease with a remaining term which exceeds 50 years
Transfer of property from a corporation to its shareholder(s)
Transfer of land to a corporation and shares of corporations issued

Tax Rates:

Land transfer tax is calculated on an incremental system based on the value of property:

If the purchase price is from $1 to $55,000: 0.5%
If the purchase price is above $55,000, up to and including $250,000: 1.0%
If the purchase price is above $250,000, up to and including $400,000: 1.5%
If the purchase price is above $400,000: 2.0%
If the purchase price is above $2,000,000, where the land contains one or two single family residences: 2.5%.

Calculation Example:

If you are buying a property (outside of Toronto) for the purchase price of $300,000, land transfer tax would be calculated as the following:

The amount up to $55,000 is multiplied by 0.5% = $275
The amount between $55,000 up to $250,000 by 1% (195,000 x 0.01) = $1,950
The amount between $250,000 up to $400,000 by 1.5% (50,000 x 0.015) = $750

Land transfer tax payable on a $300,000 purchase is $2,975.

Toronto Municipal Land Transfer Tax

The City of Toronto has levied a separate land transfer tax, that is payable along side the Ontario land transfer tax. Clients purchasing property in Toronto would be subject to pay both taxes.

First Time Home Buyers Land Transfer Tax Refund

Clients who First-time Home-buyers may be eligible for a refund on the payable land transfer tax. To qualify for the First-time Home-buyers tax refund:

Must be 18 years of age
Cannot have owned or had interest in any home anywhere
If you are married, your spouse does own any property or has not owned any property as long as he or she has been your spouse. (The method of acquire the previous property is not relevant, as long as it was owned by the stated party)
The property must be owner occupied

The First-time Home-buyers tax refund is a maximum refund of $4,000, credited against the land transfer tax payable.

Example of First Time Home Buyers Land Transfer Tax Refund

Scenario One

If Purchaser who is a First-time Home-buyer is buying a home (outside of Toronto) for $645,000, the land transfer tax payable is $9,375.
The refund is for $4,000, so the total land transfer tax payable would be: $9,375-$4,000 = $5,375.

Land transfer tax payable on a $645,000 purchase for a First-time Home-buyer is $5,375.

Scenario Two

If Purchaser who is a First-time Home-buyer is buying a home (outside of Toronto) for $345,000, the land transfer tax payable is $3,650.
The refund is for $4,000, so the total land transfer tax payable would be: $0

Land transfer tax payable on a $345,000 purchase for a First-time Home-buyer is $0.