There is a lot of intimidating real estate jargon that gets thrown around during the home buying process, and it can be hard to make sense of it all. What can be the most difficult to understand are the tax payments when buying or selling a home. We've talked about property taxes before, and today we're going to talk about the Land Transfer Tax.
What is the land transfer tax?
The Land Transfer Tax (LTT) is an Ontario provincial tax that is paid when purchasing a property. The tax is paid by the buyers - never the sellers. During the home sale transaction, your lawyer will make the arrangements for the LTT value to be paid. This payment will go through at the same time that the deed on the new home is transferred into the buyer's name (this is on the closing date of the home).
Some first time home buyers may be eligible for a refund of all or a portion with the first time home buyers tax credit. To claim this refund, the home buyer must be at least 18 years old, and cannot have previously owned a home or an interest anywhere in Canada or the world. If the home buyers are a couple, the rules apply to both. To be eligible you must have never owned a property - including any property given as a gift.
How much is the LTT?
In Ontario, the land transfer tax value is based upon the value of the property. The LTT structure is as follows:
- 0.5% of the property value up to and including $55,000
- 1% of the value exceeding $55,000, up to and including $250,000
- 1.5% of the value exceeding $250,000; and
- 2% of the amount exceeding $400,000 for land that contains at least one, maximum two, single family residences
An easier option than doing the math yourself is using our free land transfer tax calculator. For more information on what buyer's are responsible for during the home buying process, check out our free Home Buyer's Guide below.