Whether you’re a first-time homebuyer or a buyer who has been through several transactions, you may still have questions about what taxes apply when buying a property in Toronto. How much is land transfer tax in Toronto, and are you the one responsible for paying it?
Knowing what taxes are going to be applied to your purchases is very important, but do you know how to calculate the land transfer tax in Toronto? If not, you may be left waiting to find out how much you will owe until you are committed to the purchase, and that can be problematic.
It’s always best to know exactly what taxes and fees you are responsible for early in the process. Today, learn about land transfer taxes as they are applied in Toronto and prepare yourself for future purchases.
What is the Toronto Land Transfer Tax?
A land transfer tax is a tax that is paid to the government whenever a property transaction is closed, and the amount paid is dependent on the value of the property.
The land transfer tax is often the largest fee paid as part of closing costs when a transaction wraps up, so homebuyers must be aware of what costs will be associated with purchasing a property.
When buying a property in Toronto, you are responsible for paying both a municipal LTT (land transfer tax) to Toronto and a provincial LTT to Ontario.
What Is The Tax Rate In Toronto?
How much is the land transfer tax in Toronto for the properties you are interested in? The tax rate for the Toronto LTT is calculated with a marginal tax rate:
| Purchase Price | Marginal Tax Rate |
|---|---|
| Up to and including $55,000 | 0.5% |
| $55,000.01 to $250,000.00 | 1.0% |
| $250,000.01 to $400,000 | 1.5% |
| $400,000.01 to $2,000,000.00 | 2.0% |
| Over $2,000,000.00 | 2.5% |
FAQs About Toronto Land Transfer Tax Rates
How Is Land Transfer Tax Calculated In Toronto?
It’s time for you to learn how to calculate land transfer tax in Toronto. The LTT rates in Toronto are marginal tax rates, which means that calculating your tax rate will take a little bit of math.
Let’s say the property you are looking to purchase costs $250,000. Here is how you would calculate the LTT owed:
- $55,000 x 0.5% = $275
- ($250,000.00 – $55,000) x 1.0% = $1,950
- Total LTT = $2,255
Because the land transfer tax uses a marginal tax rate, you must multiply the part of the purchase value in each tax bracket by its rate and then add each of these numbers together. Then, any rebates you may be eligible for would be subtracted from your total LTT owed.
To check what tax will be owed on a property you are interested in, use Toronto’s LTT tax calculator on the municipal’s website.
Who Pays Land Transfer Tax in Toronto?
When a transaction closes for a home purchase, the homebuyer is responsible for paying the land transfer tax to the local municipal and provincial governments as part of the closing fees.
The land transfer tax for first-time homebuyers in both Toronto and the larger Ontario province, however, is reduced because first-time homebuyers qualify for a refund when they purchase a property.
Do First-Time Homebuyers Pay Land Transfer Tax In Toronto?
The Toronto land transfer tax for a first-time buyer is going to be different than it would be for a buyer with previous transactions.
Both Toronto and Ontario offer some type of first-time buyer rebates if you are eligible. These rebates can cover up to about $4,000 of LTT taxes owed, so some first-time buyers will get a full refund depending on the cost of their purchased property.
Who Qualifies For The First-Time Homebuyer Refund?
To qualify for the first-time homebuyer refund, the following must apply to you:
- You are a permanent Canadian resident or a Canadian citizen.
- You are at least 18 years old.
- You will move into the home within 9 months.
- You did not buy the home from your spouse while married; the spouse can be a former homeowner.
- The house must be eligible for a home warranty if it was recently constructed.
- You must apply for the refund within 18 months of closing.
How Much Tax Do You Pay When You Buy A House In Canada?
When buying a house in Canada, the amount of tax paid is going to depend on both the provincial and municipal land tax rates for a few specific things. You should expect to pay between 1.5% and 4% of the property’s value on closing costs, and you may also be responsible for a higher commission rate for your buying agent.
Closing fees you should pay include:
- Municipal and provincial land transfer taxes
- Legal fees for the Lawyer services
- Home insurance costs
- Interest and tax adjustment costs (if applicable)
- Township or municipality levies (if applicable)
The best way to find out the best estimate of what you will need to pay is to reach out to your closing lawyer or notary and ask them to do the calculations.
Conclusion
Taxes are complicated, and you can end up with unwanted expenses if you don’t understand how taxes may apply to you.
Now that you know how much the land transfer tax is in Toronto, you can continue your home-buying process with fewer questions and more answers.
Remember that the tax rate you are responsible for paying depends on a few factors:
- The purchase price of the property
- The property’s location (municipality and province)
- Your status as a first-time homebuyer or otherwise
While it is not possible to know the exact cost of what you will need to pay in closing costs before you close a transaction, you can calculate LTT estimates so you are properly budgeted. Be sure to do this before your next transaction!
