There are many closing costs to consider when purchasing a home in Ontario. One of the most significant closing costs is the Ontario Land Transfer Tax. With few exceptions, Land Transfer Tax (LTT) is payable to the Ontario provincial government on the conveyance of real property at the time when the transaction closes.
In most transactions, the amount of the tax is calculated based on the amount paid for the property. Below are the Ontario LTT rates:
|Purchase Price of Home||Marginal Tax Rate|
|$55,000.01 to $250,000.00||1.0%|
|$250,000.01 to $4000,000.00||1.5%|
|$400,000.01 to $2,000,000.00||2.0%|
|Over $2,000,000 (where 1 or 2 residences)||2.5%|
Refund/Rebate for First-Time Homebuyers
If you are a first-time homebuyer buying an eligible home, you may qualify for a refund up to a maximum of $4000.00.
An “eligible home” can be a detached or semi-detached house, a townhouse, a residential duplex, triplex or fourplex, certain mobile homes, a condominium unit, certain manufactured homes, partial ownership of property or shares of the capital stock of a co-op, depending on intent to occupy, and more.
To be eligible for the refund, you must meet the following criteria:
- You must be a Canadian citizen or permanent resident of Canada.
- You must be at least 18 years of age.
- You must occupy the home as your principal residence within nine months of transfer of title to the buyers.
- You cannot have owned an eligible home before anywhere else in the world.
- Your spouse cannot have owned a home while they were your spouse.
Purchasing with someone else
The maximum refund of $4000 is available per transfer, not per person. If you are purchasing a property with someone who is not a first-time homebuyer, the refund will be reduced to reflect that person’s interest in the property. As an example, if someone who is ineligible for the refund will be an equal owner at 50%, then only 50% of the refund is applicable.
There are certain exceptions for spouses, as defined by section 29 of the Family Law Act. In Ontario, if one spouse is eligible for the refund and one is not, the eligible spouse may apply for the full Land Transfer Tax refund, so long as the ineligible spouse sold their interest in all homes prior to the two becoming spouses. On the other hand, if the property was not sold prior to becoming spouses, neither spouse is eligible for a refund.
How to claim the refund
Qualifying first-time homebuyers may claim an immediate refund at the time of the transfer. Your lawyer can assist you in ensuring that the refund is claimed at the time of the transfer.
If you don’t apply at the time of obtaining the property, the full amount of tax must be paid upfront, the purchaser must apply for the refund to the Minister of Finance within 18 months after the purchase to be considered. Purchasers who would otherwise be eligible for the refund, but who are not Canadian citizens or permanent residents of Canada at the time of closing, have 18 months following registration to become eligible and apply.
Our lawyers have extensive experience assisting first-time homebuyers throughout the purchase of their first property. If you have any questions about Ontario’s Land Transfer Tax and the refund for First-Time Home Buyers, our team would be pleased to assist you.