If you’re thinking of buying a home in Toronto, it’s important to be aware that there will be several costs on top of the actual deposit for the property. Some of these costs will depend on whether you are buying a brand new property or a resale property, and some will be affected by what kind of home you are purchasing. One cost that anyone purchasing a home or business in Toronto should be aware of is land transfer tax. Here are four key things you need to know about it.
1. Toronto has its own land transfer tax
With the exception of Alberta and Saskatchewan, every province of Canada charges home buyers provincial land transfer tax. However, home buyers in Toronto are unfortunately required to pay a municipal land transfer tax to the city as well as the provincial tax. Allegedly the purpose of this is to help pay for affordable housing, and currently around 3.8% of Toronto’s budget comes from this particular tax.
2. The amount paid is determined by the price of the property
Both provincial and municipal land transfer taxes are based on the price of the property being purchased. Each portion of the property’s value is taxed at a different rate. The rates are currently the same for both municipal tax and provincial tax, and are as follows:
It can be confusing calculating how much tax you will pay, so it is advisable to use one of many online calculators or consult with your lawyer or accountant.
3. You may be entitled to a land transfer tax rebate
Rebates are available, however only for first-time home-buyers who are either a Canadian citizen or permanent resident of Canada. In order to qualify, the buyer must be at least 18 years old and move into the property within 9 months of the sale closing date. Furthermore, in order to be eligible, neither you nor your spouse can have owned a home anywhere else in the world. The time limit to apply for a refund is 18 months from the date of registration, and the maximum refund is $4,000. Other factors and exemptions apply, so it is best to seek legal advice to ensure that you can budget appropriately.
4. The tax is paid on the closing date of the sale
Land transfer tax is paid on upon the sale closing and must be paid outright. In other words, it cannot be mortgaged. Therefore it is essential to consider the cost in advance and ensure that money is set aside. With high property prices in the city, land transfer tax can be a significant amount of money, and rebates can take some time to process, so it is important not to rely on them.