Who Pays Land Transfer Tax in Ontario?

Land transfer tax is a tax payable when real estate is transferred within the province of Ontario. It's payable by the purchaser of the property, unless they qualify for an exemption.

Who is exempt from land transfer tax in Ontario?

• First-time homebuyers can receive a credit of up to $4,000.
• Spouses who transfer ownership of a property to each other.
• Gifts of Land with no consideration and no mortgage.
• Former Spouses who transfer ownership of property pursuant to an agreement to live separate and apart or court order.
• Farm land transactions between family members under certain conditions.

Do I have to pay land transfer tax in Ontario?

If you are purchasing real estate in Ontario, you are required to pay land transfer tax unless you fall into one of the exempt categories. If you are selling, you are not responsible for paying land transfer tax.

How much are land transfer taxes in Ontario?

The amount of land transfer tax you pay in Ontario depends on the purchase price of the property. As of 2023, the land transfer tax rate is:

• 0.5% on the first $55,000 of the purchase price.
• 1.0% on the portion of the purchase price above $55,000.
• 1.5% on the portion of the purchase price above $250,000.
• 2.0% on the portion of the purchase price above $400,000.
• 2.5% on the portion of the purchase price above $2,000,000.

When is Land Transfer Tax Payable?

Land transfer tax is payable at the time of closing, when the transfer of ownership is completed. The tax must be paid before the transfer of ownership can be registered with the government.

It's important to consider the amount of land transfer tax in your closing costs when purchasing a property. Your real estate lawyer can provide you with an estimate of the amount of tax that you will need to pay, based on the purchase price of the property and the applicable tax rates.

Land Transfer Tax in Toronto, Ontario

In addition to the Ontario Land Transfer Tax, the City of Toronto imposes an additional Municipal Land Transfer Tax on properties located within the city limits. The boundaries of Toronto are:

• Steeles Avenue as the North border
• Etobicoke as the West border
• Scarborough as the East border
• Lake Ontario as the South border.

The Municipal Land Transfer Tax is calculated the same ways as the Ontario Land Transfer Tax:

• 0.5% on the first $55,000 of the purchase price.
• 1.0% on the portion of the purchase price above $55,000.
• 1.5% on the portion of the purchase price above $250,000.
• 2.0% on the portion of the purchase price above $400,000.
• 2.5% on the portion of the purchase price above $2,000,000.

It's important to note that the Municipal Land Transfer Tax is in addition to the Ontario Land Transfer Tax meaning properties within the Toronto boundaries pay double the amount of land transfer tax.

First-time homebuyer credit in Toronto

Similarly to the Ontario Land Transfer Tax credit, there is a tax credit available for first-time homebuyers that applies to Municipal Land Transfer Tax. Eligible individuals can receive up to $4,475 deducted from the amount payable. This is in addition to the $4,000 tax credit applied to Ontario Land Transfer Tax.

Examples

If you purchase a property for $1,000,000 outside of Toronto, the amount of Ontario Land Transfer Tax due would be $16,475 ($55,000 x 0.5%) + ($195,000 x 1.0%) + ($150,000 x 1.5%) + ($600,000 x 2.0%).

If you purchase a property for $1,000,000 within Toronto, the total amount of Land Transfer Tax due would be $32,950.

If you purchase a property for $1,000,000 outside of Toronto and are a first-time homebuyer, the amount of Ontario Land Transfer Tax due would be $12,475

If you purchase a property for $1,000,000 within Toronto and are a first-time homebuyer, the total amount of Land Transfer Tax due would be $24,475.

Conclusion

It's important to understand your obligations and responsibilities when it comes to paying land transfer tax in Ontario. When considering your budget for purchasing, make sure you consider and estimate the Land Transfer Tax payable. This amount will need to be paid out of pocket on closing and cannot be financed. If you are considering purchasing property in Toronto, it's necessary to be aware of the boundaries in order to determine whether Municipal Land Transfer Tax applies. The address of the property can increase the total Land Transfer Tax Payable by double.