As a real estate specialist working in the Greater Toronto area, I am here to provide you with a comprehensive understanding of land transfer tax paid when purchasing residential property. This tax is applicable to buyers of real estate and is a significant expense that must be taken into consideration when purchasing. In this blog post, I will answer some common questions that buyers and sellers have about land transfer tax in Toronto.

What is land transfer tax?

Land transfer tax is a tax that is imposed on the transfer of property. When a property is sold, the buyer is responsible for paying land transfer tax to the government. This tax is calculated as a percentage of the purchase price of the property.

How is land transfer tax calculated in Ontario?

The land transfer tax in Ontario is calculated based on the purchase price of the property. The current tax rates are:

• 0.5% on the first $55,000
• 1.0% on the amount exceeding $55,000 up to and including $250,000
• 1.5% on the amount exceeding $250,000 up to and including $400,000
• 2.0% on the amount exceeding $400,000
• 2.5% on the amount exceeding $2,000,000 for properties located in the City of Toronto

What is the Toronto land transfer tax?

The Toronto land transfer tax is an additional tax that is imposed on top of the provincial land transfer tax. This tax is applicable to properties located within the City of Toronto. The Toronto land transfer tax was introduced in 2008.

How is the Toronto land transfer tax calculated?

The Toronto land transfer tax is calculated as a percentage of the purchase price of the property. The current tax rates are:

• 0.5% on the first $55,000
• 1.0% on the amount exceeding $55,000 up to and including $250,000
• 1.5% on the amount exceeding $250,000 up to and including $400,000
• 2.0% on the amount exceeding $400,000 up to and including $2,000,000
• 2.5% on the amount exceeding $2,000,000

What are the current land transfer tax rates in Toronto and outside the city?

The current land transfer tax rates in Toronto and outside the city are the same for the provincial portion of the tax. However, the Toronto land transfer tax is only applicable to properties located within the City of Toronto. You can calculate land transfer costs here.

• This table shows the estimated land transfer costs for properties purchased at different price points in Toronto and outside of the city. The land transfer costs are calculated based on the current tax rates for both the provincial and Toronto land transfer taxes. Buyers should keep in mind that this is an estimation only, and that the actual land transfer costs may vary based on a number of factors.

Are there any exemptions or rebates for land transfer tax?

There are certain exemptions and rebates available for the Toronto land transfer tax. First-time homebuyers in Toronto may be eligible for a rebate of up to $4,475, which is the maximum allowable rebate.

If you are a first-time homebuyer in Toronto, you may be eligible for both the Toronto land transfer tax rebate and the Ontario land transfer tax rebate. However, there are specific criteria that must be met in order to qualify for each rebate.

For the Toronto land transfer tax rebate, you must:

• Be at least 18 years old
• Occupy the home as your principal residence within nine months of the date of transfer
• Have never owned a home or an interest in a home anywhere in the world
• Be a Canadian citizen or permanent resident of Canada
• Obtain a mortgage from a financial institution
• Pay the Toronto land transfer tax when you purchase your home
• The maximum rebate available is $4,475, which is equal to the full amount of the Toronto land transfer tax payable on a property with a purchase price of up to $400,000.

For the Ontario land transfer tax rebate, you must:

• Be at least 18 years old
• Occupy the home as your principal residence within nine months of the date of transfer
• Have never owned a home or an interest in a home anywhere in the world
• Be a Canadian citizen or permanent resident of Canada
• Obtain a mortgage from a financial institution
• Pay the Ontario land transfer tax when you purchase your home
• The maximum rebate available is $4,000, which is equal to the full amount of the Ontario land transfer tax payable on a property with a purchase price of up to $368,333.

It’s important to note that the Toronto land transfer tax rebate and the Ontario land transfer tax rebate are separate and distinct rebates, with different eligibility criteria and maximum amounts. As a first-time homebuyer in Toronto, you may be eligible for both rebates, but you will need to meet the specific requirements for each one.

What are the benefits of buying a property in Toronto versus outside of the city in terms of land transfer tax?

The benefits of buying a property in Toronto versus outside of the city in terms of land transfer tax depend on the individual circumstances of the buyer. If you are purchasing a property within the City of Toronto, you will be required to pay the additional Toronto land transfer tax. 

However, if you are purchasing a property outside of the City of Toronto, you will only be required to pay the provincial portion of the tax. In some cases, properties outside of Toronto may also be less expensive than those within the city, resulting in a lower land transfer tax payment.

What should buyers and sellers consider when it comes to land transfer tax in Toronto?

Buyers and sellers should consider the amount of land transfer tax that will be payable when buying or selling a property in Toronto. 

This tax can be a significant expense and it is important to factor it into the overall cost of buying or selling a property. Buyers should also consider whether they are eligible for any exemptions or rebates that may reduce the amount of land transfer tax payable.

Sellers should also be aware of the land transfer tax, as it may impact the value of their property. A higher land transfer tax may make a property less attractive to potential buyers, while a lower tax may make a property more desirable.

How can a real estate agent help with navigating land transfer tax in Toronto?

A real estate agent can provide valuable assistance when it comes to navigating land transfer tax in Toronto. They can explain the different tax rates and exemptions that are available, and help buyers and sellers to understand the impact that land transfer tax may have on their transaction. 

A real estate agent can also provide advice on negotiating the payment of land transfer tax as part of the overall purchase price of a property.

Conclusion: Is it worth buying a property in Toronto despite the higher land transfer tax?

The decision to buy a property in Toronto versus outside of the city depends on a variety of factors, including personal preferences, location, and budget. While the land transfer tax in Toronto may be higher, buyers may find that the benefits of owning a property within the city outweigh the additional cost. 

Ultimately, buyers should work with a real estate agent who can help them to navigate the complexities of land transfer tax and make an informed decision that meets their individual needs and goals.

In summary, understanding land transfer tax is an essential part of the real estate transaction process in Toronto. Buyers and sellers should be aware of the tax rates, exemptions, and rebates that are available, and work with a real estate agent who can provide