News feeds have been buzzing about changes in Ontario’s Land Transfer Tax. This is something that will have particular impact on first-time buyers and luxury homebuyers. It’s a bit of a good news/bad news scenario. Here, we will explain the changes so that when you purchase your home, taking ownership will be a smooth and happy experience.
What is the Ontario Land Transfer Tax?
This is the tax the government of Ontario charges the homebuyer. The Land Transfer Tax (LTT) is payable on the day the transfer of ownership is registered, in other words, on closing day.
What are the changes?
First-time Homebuyer’s Refund: As of January 1, 2017 qualified first-time homebuyers may be eligible for a refund on all or part of the Ontario Land Transfer Tax to a maximum of $4000 (this new change doubles the current maximum rebate of $2000). Essentially, this will allow first-time buyers to claim more of the purchase price of a home before incurring LTT costs.
In monetary terms, it means that qualifying purchasers would pay no LTT on the first $368,000 of the purchase cost of any eligible property. So if you’re a qualified, first-time homebuyer and you buy an eligible home for say, $350,000, you pay $0 in Ontario LTT.
To benefit from this refund, first-time homebuyers must meet specific eligibility requirements. The property to be purchased must also meet specific eligibility requirements. Click here to learn what those requirements are.
New Land Transfer Tax Rates for Homebuyers:
For all homebuyers (not first-time) making property purchases, Ontario has “modernized” the LTT rates which have not changed since 1989. As of January 1, 2017 the new tax rates will be:
- 0.5 per cent up to and including $55,000 (no change);
- 1 per cent above $55,000 up to and including $250,000 (no change);
- 1.5 percent above $250,000 up to and including $400,000
- 2 per cent above $400,000 up to and including $2,000,000
- 2.5 percent above $2,000,000 and over (an increase of 0.5 percent)
Is that all the LTT homebuyers have to pay?
Unfortunately, the answer is no. Many local municipalities also charge LTT. For example, a home purchased in the city of Toronto is subject to the Municipal Land Transfer Tax. And like the Ontario LTT, it is due at the time of closing. The rates are similar to what Ontario charges. You can learn more here.
The City of Toronto does offer rebate opportunities for homebuyers including first-time buyers. To see if you are eligible for a City of Toronto LTT rebate, click here.
Wherever you are purchasing a home in Ontario, be sure to check if the municipality in which the home is located charges its own LTT. This will help you to be financially prepared and avoid any unpleasant surprises on the day of the property closing.
After all this, do homebuyers have to pay HST too?
The answer is a qualified ‘yes’. Homebuyers investing in a newly constructed home or one that has been significantly renovated are required to pay HST. However, HST does not apply to resale homes. The good news here is that buyers of new homes may receive a rebate of up to $24,000 of the provincial portion (8%) of the HST. To learn more, contact the Canada Revenue Agency at 1-800- 959-1953.
Still have questions?
When it comes to purchasing a home there is no doubt that knowledge is power. We strongly recommend that you visit the links below to learn more. After all, the more you know, the more prepared you will be to find the home you’ve always wanted.
We invite you to contact us with any questions or if you’d like to further discuss any of these changes. Would you like to stay informed with more valuable articles like this one? Please click here to sign up for our newsletter!