During your home buying journey, you might wonder: How do I calculate the Ontario land transfer tax? Before finalizing the purchase of your home, you must ensure adequate money is placed aside to cover several fees and closing costs. These extra costs are related to property transfer from the seller to the buyer.
In this article, we will assist you in preparing for costs in order to avoid unpleasant surprises and make budgeting easier.
What exactly is land transfer tax?
When the property title (including the land it resides on) is transferred to the buyer’s name, a tax is paid to the government when the transaction closes. The amount you pay depends on the property value. Fortunately, the closing costs in Toronto are offset by the first-time homebuyer provincial rebate (FTHB).
In Toronto, you can also receive a municipal land transfer tax. This payment for land transfer tax is not included with your mortgage. You can pay the amount through the various levels of government through your lawyer, who completes the home purchase. Payment must be considered when the title is transferred to your name, which your lawyer manages for you.
Your lawyer must confirm the details of the total taxes related to the title transfer. These taxes include Land Transfer Tax (LTT), Harmonized Sales Tax (HST) (for new builds), Municipal Land Transfer Tax (MLTT), Provincial Sales Tax (PST), and Non-Resident Speculation Tax (NRST) on high-ratio default insurance (if applicable) on the purchase.
Estimating Land Transfer Tax
LTT rates vary provincially. The calculation is based on the purchase price in addition to the location. The Ontario Land Transfer Tax is as follows:
0.5%: up to $55,000
$55,001 – $250,000 is 1%
$250,001 – $400,000 is 1.5%
$400,001 – $2,000,000 is 2%
$2,000,001 and upwards is 2.5%
Note that Toronto’s municipal land transfer tax is equal to Ontario’s.
Experts advise that people should budget between 1% and 2% of their property’s value to cover LTT. Contact your lawyer to ensure you have the correct prices if you want an exact cost.
Using a Land Transfer Tax Calculator
First, you need to enter the property purchase price. You will have to address first-time home buyer status and provincial residency questions. If you aren’t a Canadian resident, assume you will need to make payment in full, in addition to HST (for newly built condominiums or homes) and NRST.
Additional Rebates and Taxes in Ontario
In addition to LTT and associated fees for your purchase, HST or GST may apply if your home was newly constructed (not owned previously). The good news is that you may qualify for additional rebates on your federal amount. You may also be eligible for rebates distributed provincially where your property resides.
For Toronto, there is a Non-Resident Speculation Tax of 25%. It applies to any residential property purchased throughout the province. Additionally, this only applies to non-residents.
The additional rebates are as follows:
8% on PST for default insurance
A maximum of $4,000 for Provincial LLT Refund
A maximum of $4,475 on Toronto MLTT Refund
Other opportunities for Toronto rebates
The Canadian government also provides incentives, grants, and rebates. The CMHC (Canada Housing and Mortgage Corporation) outlines them on their website.
For assistance in navigating the costs associated with the Ontario Land Transfer Tax, please book your appointment with one of our advisers at Northwood Mortgage by calling us at 416-969-8130 or contact us here.