who pays land transfer tax in Ontario?

| Buying

So, who pays land transfer tax? It’s a painful, common question our clients tend to ask. We thought we’d talk a little about this unavoidable cost, covering not only who pays the tax but also the other important details you should know about it.

Spoiler alert: In Toronto, it’s doubly confusing!

Land Transfer Tax 101

Let’s start with a brief overview:

  • Land transfer tax is paid before property ownership changes hands
  • It is separate from property tax as a one-time tax owed at the time of purchase
  • It is calculated based on the purchase price at two levels: 1) the province and 2) the municipality
  • Land transfer tax applies to all home types including apartment/townhouse condos and new build homes
  • Most first-time home buyers can qualify for a rebate

Do you have more questions about buying a home in Toronto? Here are some more posts you might find helpful: 

Why do I have to pay land transfer tax?

Land transfer tax covers the costs of essential services and ongoing development and maintenance of the local infrastructure including roads, schools, hospitals, and parks.

What are the land transfer tax rates in Ontario?

Residential land transfer tax rates in Ontario are based on property value using a sliding scale like this:

  • First $55,000 0.5%
  • Over $55,000 up to $250,000 1%
  • Over $250,000 up to $400,000 1.5%
  • Over $400,000 2%
  • Over $400,000 up to $2,000,000 2.5% (if you have one or two single-family residences)

Clear as mud? Here’s what that would look like for a $1 million home:

  • 0.5% on the first $55,000 = $275
  • 1.0% on the amount over $55,00 up to $250,000 – the initial $55,000 = $1,950
  • 1.5% on over $250,000 up to $400,000 – the $150,000 = $2,250
  • 2.0% on the $600,000 balance remaining on the $1 million = $12,000
    • Total: $16,475

Thinking about buying a condo in Toronto? Click here for our ultimate guide to condo buying in the GTA.

What was that about municipalities and land transfer tax?

Right! Just to make things even more complicated, your land transfer tax also depends on your municipality. For example, Ajax does not charge a municipal tax, while in Etobicoke you pay double the land property tax.

Why? Because Etobicoke is part of the municipality of Toronto which charges the same land transfer tax as the provincial tax. In fact, it’s the only municipality in Ontario that charges an additional land transfer tax. So, if you purchase a home in the municipality of Toronto, our calculation above is doubled to $32,950 ($16,475 x 2).

What areas are part of Toronto?

We can’t stress enough the importance of speaking to a savvy real estate team (we can help) to ensure you understand the municipality of your preferred neighbourhood. For example, while you pay Toronto’s municipal taxes in Etobicoke, just down the street in Mississauga you don’t. This is because Mississauga is in the municipality of Peel, not Toronto.

The areas where you do pay double land transfer tax are the ones included in what is known as “the six:”

  1. Toronto
  2. East York
  3. Etobicoke
  4. North York
  5. Scarborough
  6. York

The “safe zone” outside Toronto’s municipality are beyond the Etobicoke Creek and Highway 427 to the west, Steeles Avenue to the north, and the Rouge River/Scarborough–Pickering Townline to the east.

Get more home-buying advice with these posts next:

What are the biggest costs I will need up front when buying a home in Ontario?

The main costs you’ll need to pay at the time of, or before closing on our $1 million example include:

  • Property appraisal fees at about $600
  • Building inspection fees at about $500
  • Legal fees averaging around $2,000
  • Land transfer tax (Toronto) $32,950
  • Down payment $75,000

That adds up to just over $111,000 needed up front when purchasing a home in the Municipality of Toronto.

Wondering how much home ownership costs in Toronto? Read our post: How Much Does it Cost to Own a Home in Toronto right here.

So, who pays the Land Transfer Tax In Ontario?

That brings us to the answer you’ve been waiting for: The buyer pays the land transfer tax, which is why it’s so important to understand the calculation.

Are there any rebates or deductions for Ontario land transfer tax?

Yes! Eligible first-time homebuyers purchasing a property valued over $368,000 can qualify for up to $4,000 in rebates and no land transfer tax owed on the first $368,000 of the value. Most first-time buyers will qualify as long as they are over 18, have never owned a home, and if purchasing with a spouse, their partner has never owned a home. Also, the Municipality of Toronto offers an additional rebate to first-time buyers of up to $4,475.

Although you might feel a little wobbly finance-wise looking at these numbers, you’re now armed with the info needed to avoid undue financial stress so you can start ramping up those savings! If you have specific questions about land transfer and your unique situation, don’t hesitate to reach out! We’re happy to guide you.

Looking for the best Toronto real estate team to help make your home-buying dreams come true? That’s where we come in! Get in touch with The Christine Cowern Team today by calling 416.291.7372 or emailing us at hello@christinecowern.com.