This guide covers everything you must know about Ontario land transfer tax when buying property. You’ll learn what it is, who pays it, how it’s calculated, when rebates or exemptions may apply, and what other closing costs are involved. Whether purchasing your first home, moving up to a larger house, or buying an investment property, understanding land transfer taxes ensures you can budget accordingly and avoid surprises.
Ontario Land Transfer Tax Calculator
What is the Land Transfer Tax Ontario?
The land transfer tax (LTT) is required when purchasing real estate in Ontario, whether buying a residential property like a house or condo, vacant land, or a commercial building. It is levied by the provincial government under the Ontario Land Transfer Tax Act.
Some municipalities in Ontario also charge municipal land transfer taxes in addition to the provincial one. The most notable municipal land transfer tax is in Toronto.
The land transfer tax generates revenue for programs, services, and infrastructure investments that benefit Ontarians. While an extra cost for homebuyers, the tax funds schools, healthcare, roads, parks, and other public services.
Key facts about land transfer tax in Ontario:
- Applies to all transfers of land and beneficial interests in land in Ontario.
- Paid by the buyer (not the seller) before the property can be transferred.
- Calculated based on the value of the property. Higher-valued properties are taxed at progressively higher rates.
- Provides revenue for Ontario's provincial budget and public services.
How is the Land Transfer Tax Calculated in Ontario?
Ontario land transfer tax uses a graduated rate structure based on the property's purchase price. Each portion of the price falls into a different tax bracket with an increasing marginal tax rate. This means that more expensive properties are taxed at a higher rate.
The tax brackets for land transfer tax in Ontario are:
| Purchase Price | Marginal Tax Rate |
|---|---|
| Up to $55,000 | 0.5% |
| $55,000 to $250,000 | 1.0% |
| $250,000 to $400,000 | 1.5% |
| $400,000 to $2,000,000 | 2.0% |
| Over $2,000,000 | 2.5% |
To calculate the total land transfer tax owing:
- Divide the purchase price into the appropriate tax brackets
- Multiply the amount within each bracket by its marginal tax rate
- Sum the amounts from each bracket
For example, a home purchased for $550,000 would calculate the land transfer tax as follows:
- $55,000 x 0.5% = $275
- ($250,000 - $55,000) x 1% = $1,950
- ($400,000 - $250,000) x 1.5% = $2,250
- ($550,000 - $400,000) x 2% = $3,000
Total tax payable = $275 + $1,950 + $2,250 + $3,000 = $7,475
Who Pays the Land Transfer Tax in Ontario?
In Ontario, the buyer of the property is responsible for paying the land transfer tax. Payment must be made before the property can be transferred to the new owner's name and registered under their ownership. For residential purchases, this tax is typically included in the closing costs and paid out of the buyer's funds or through their mortgage financing.
If multiple parties buy a property together, each buyer must pay their share of the land transfer tax. For example, if two people jointly purchase a home, they would each be responsible for 50% of the tax. The amount owing is calculated based on the total purchase price, but the payment responsibility is shared between the co-buying parties according to their ownership interest in the property.
Non-Resident Speculation Tax in Ontario
In addition to the Land Transfer Tax, non-residents of Ontario are subject to a 15% Non-Resident Speculation Tax (NRST) on purchasing residential properties located within the Greater Golden Horseshoe Region (GGH). The GGH includes the Greater Toronto Area and extends to various regions, such as Peterborough, Northumberland, Wellington, and Niagara.
The NRST discourages foreign buyers from investing speculatively, which can contribute to inflated housing prices in the region. This tax applies to the provincial and municipal Land Transfer Taxes.
Are There Any Exemptions to Paying the Land Transfer Tax?
In some cases, buyers may qualify for exemptions allowing them to avoid paying the land transfer tax, including:
- Transfers Between Spouses: When property is transferred from one spouse to another spouse or common-law partner, both must occupy the home as their primary residence for this exemption.
- Transfers to Family Business Corporations: Individual property owners can tax-free transfer property to a family business corporation they control if it will be used for business purposes.
- Transfers of Farmland to Family Members: Farmland transfers between family members, such as parent to child, may be exempt if the property will continue to be used for farming. Certain conditions apply.
- Other Exemptions: Additional exemptions may apply for property transfers to non-profits due to divorce proceedings or under other specific circumstances. Professional advice is recommended to confirm eligibility.
What LTT Rebates Are Available for First-Time Homebuyers in Ontario?
First-time homebuyers in Ontario may qualify for a refund of a portion of the land transfer tax paid at closing:
- Up to $4,000 rebate available for first-time buyers.
- Rebates cover the full tax on homes purchased for $368,000 or less.
- For homes above 368,000, buyers receive a $4,000 rebate and must pay the amount owing over $4,000.
For more information, read our article on the Land Transfer Tax Rebate for First-time Home Buyers in different regions of Canada.
How Does Toronto Municipal Land Transfer Tax Work?
If you're purchasing a property within the City of Toronto, you'll be subject to an additional Municipal Land Transfer Tax (MLTT) on top of the provincial Land Transfer Tax. The MLTT has the same tax brackets as the Ontario LTT for properties under $3 million and an additional threshold for properties over $3 million.
Non-residents also pay a 15% Non-Resident Speculation Tax on Toronto-area home purchases, the funds of which go to Ontario’s housing programs.
Toronto's municipal land transfer tax generates significant revenue that funds City services and infrastructure. However, it also adds thousands of dollars in costs for local homebuyers.
What Are Other Costs Associated with Buying a Home in Ontario?
While the Land Transfer Tax is a significant expense, it's important to be aware of other costs associated with buying a home in Ontario:
- Legal fees, title insurance, and administrative costs related to the transfer of ownership. The exact amount can vary depending on the complexity of the transaction and the professionals involved.
- Property inspection: Before finalizing your purchase, it's advisable to have a professional property inspection conducted to assess the condition of the home and identify any potential issues. Depending on the size and age of the property, the cost of an inspection can range from a few hundred to over a thousand dollars.
- Homeowners' insurance: Lenders typically require proof of homeowners' insurance before approving a mortgage. The cost of insurance varies based on factors such as the property's location, value, and coverage selected.
Ontario Land Transfer Tax FAQs
When do I need to pay the Ontario land transfer tax?
Payment is due on closing before the property can be registered under the new owner's name. Land transfer tax is typically accounted for in closing costs.
Does Ontario charge land transfer tax on commercial properties?
Yes, commercial transactions in Ontario are subject to provincial land transfer tax based on 0.5-1.5% of the property's fair market value. Certain exemptions may apply.
Can I get a tax credit when buying a rental property in Ontario?
No, Ontario does not currently offer any land transfer tax credits or rebates specifically for rental or investment properties. Only the first-time homebuyer rebate exists.
What documents needed to claim the homebuyer rebate in Ontario?
You'll need your purchase agreement, registered title transfer deed, tax statements, and other documents proving eligibility as a first-time homebuyer in Ontario.
What are the penalties for not paying land transfer tax in Ontario?
Complying with tax obligations is imperative, as consequences may include significant fines, tax liens against the property, legal action, or imprisonment in cases of tax evasion.
For homebuyers in Ontario, the land transfer tax is an extra cost to factor into the budget when purchasing a property. Understanding how the graduated rate structure works, who's responsible for payment, which rebates or exemptions you might qualify for, and avoiding common mistakes can help you plan for this tax efficiently.
While an additional upfront expense, the land transfer tax ultimately helps fund the public services and infrastructure that benefit our communities. However, costs add up quickly after factoring in other closing fees, so being prepared is key. For personalized advice about your situation, contact BestMO for assistance with your mortgage and real estate needs.
