Ontario Land Transfer Tax – The Full Story
There is no better feeling than buying a new home. When you are considering purchasing your new dream home, you need to be aware that there are additional fees and taxes to consider in the total down payment required. One of the biggest expenses is the Ontario Land Transfer Tax (OLTT). All homeowners need to know what it entails and how to qualify for maximum government rebates.
Land Transfer Tax in Ontario – The Basics
The OLTT is a tax levied against the purchaser of a property upon completion of the sale. It applies to both residential and commercial properties as well as the transfer of a property title into another person’s name in most situations.
To help reduce the impact to new home sales, land transfer tax rebates for first-time homebuyers have been implemented across the country.
Land transfer tax is calculated as a percentage of the purchase price. In the City of Toronto, there is an additional municipal land transfer tax. Check with your real estate agent or real estate lawyer for specific details of what will be due on closing so there are no surprises.
The OLTT rates are as follows:
- First $55,000.00: .5%
- $55,000.01 to $250,000.00: 1.0%
- $250,000.01 to $400,000.00: 1.5%
- $400,000.01 to $2,000,000.00: 2.0%
- Over $2,000,000.00: 2.5%
The good news is that first-time homebuyers are eligible for a refund up to $4,000.00.
To be eligible, the buyer must
- Be a Canadian citizen or permanent resident;
- Be at least 18 years old;
- Not have owned a home anywhere in the world and if the buyer has a spouse, the spouse cannot have owned a home while he or she was the buyer’s spouse;
- Occupy the home within nine months of purchase; and
- Apply for the refund within 18 months after purchase.
In most circumstances, the refund is claimed at the time of registration in the electronic registration system.
Visit the Ontario Ministry of Finance for the most up to date requirements.
If you overpaid land transfer tax, you can write to the Ministry of Finance and request a refund. Your letter should contain the reason for the refund along with copies of the following:
- Registered conveyance;
- Statement of adjustments;
- Agreement of purchase and sale; and
- Evidence of the tax paid.
Co-purchasing a Property
If multiple people are purchasing a home and one or more are not a first-time homebuyer, the refund will work differently. The refund will be proportionate to the interest acquired by the person(s) who qualify for the refund. For example, if a parent and a child purchase a home together with equal interests and the parent has previously owned a home but the child has not, then the child may claim up to 50% of the maximum allowable refund. The parent cannot claim anything. In this example, if the parent did not acquire a beneficial interest in the property, the child may qualify for the full rebate, but the buyers would have to pay the OLTT upfront and apply for a refund after closing.
You Could be Audited
The refund applications are subject to an audit by the Ministry of Finance. If you obtain or attempt to obtain a refund fraudulently, then you could be charged and have to pay a fine. In these matters, always act with complete honesty and integrity.
Pick the Right Real Estate Partners
Buying real estate is complicated and people can be uninformed on the facts. Working with an experienced and knowledgeable team comprised of a real estate agent and a real estate lawyer can make a big difference. Their roles are to help you better understand the OLTT, what you will have to pay and any refunds you are entitled to, among other aspects of your real estate transaction.
At Mackesy Smye, our dedicated and experienced real estate lawyers will guide you through the process and help you understand everything you need to know about the Ontario Land Transfer Tax – contact us today for a consultation.