The Ontario Land Transfer Tax - Quick Review
Wednesday Apr 15th, 2020Share
There is one significant cost that's incurred when purchasing real estate in Ontario that is often overlooked when home buyers are putting their budgets together. Some people might not be aware of this cost, as can be the case with many first time buyers. And for some people, it may have been so long since they purchased a home that they've forgotten about it.
So what is it? It is the dreaded Ontario Land Transfer Tax.
Who pays land transfer tax on real estate transactions in Ontario? Well, in Ontario it is the buyer. The seller does not pay this tax. As mentioned earlier, this is something that is often unknown to new buyers or simply overlooked by buyers as an item to budget for and that is something that you absolutely do not want to do.
And why is this? Well, it's because, again as mentioned earlier, it is not an insignificant cost.
In Ontario we have different taxes for different levels of house values, and those levels range anywhere from 0.5% of the purchase price of your new home up to 2.5% of the purchase price. For example, the land transfer tax on a $400,000 home in Hamilton would come out to $4,475, while on a $1,000,000 home it would be $16,475. That's some serious change, if you ask me.
So by now you I am guessing that you get the idea - this is not an expense that's insignificant. And you need to have this money available at closing - it is not a tax you pay later or over some period of time. You have to pony it up on closing day so that is why it is so important to not only just be aware of it, but you absolutely have to budget for it or you risk not being able to close on your new home and that...well, no one wants that to happen.
Now if you have a certain budget in mind for your new home and want to get an idea of what you're going to have to budget for land transfer tax at closing, you can either manually use the provincial formula orrrr you can use the simple calculator on my site. There is a link to mine right here and one to the old fashioned way below - so take your pick on which way you prefer.
Before we wrap things up here there is some good news for some of you, and it's specifically for first time buyers.
Hooray, if you are a first-time buyer you may be eligible to receive a refund for all, or more likely, a portion of the land-transfer tax, which is applied at closing as well. If you are not a first time buyer, well, sorry - you're going to have to pay it without any refund, but on the bright side, you're in a great new home so it is not all that bad.
So that is the quick story on the Ontario Land Transfer Tax, if you have any additional questions, just comment below and I will be happy to get back to you. Thanks for your time today. I hope you enjoyed this and found it useful. Take care and I look forward to catching up again soon.
Mike McCarthy, MBA
Do it the old fashioned way here - https://www.fin.gov.on.ca/en/bulletins/ltt/2_2005.html