How Ontario Land Transfer Tax Is Calculated on a Home Purchase

Land transfer tax is one of the largest closing costs when you buy a home in Ontario, and it often surprises buyers because it is due on closing, on top of the down payment. Understanding how it is built helps you budget with fewer surprises.

This article walks through the provincial bracket rates, a worked example, what counts toward the value, when the tax is paid, and the situations that can raise or lower the amount. Toronto adds its own separate municipal land transfer tax, which is not covered here.

The bracket rates

Ontario calculates land transfer tax in brackets on the value of the consideration. For agreements entered into after November 14, 2016 that are registered on or after January 1, 2017, the rates are set out below. Each rate applies only to the portion of the value that falls in its bracket.

There is an extra bracket for land with one or two single family residences. On the part of the value over $2,000,000, the rate is 2.5%. Single family residences include cottages and cabins, and the zoning of the land does not matter.

A worked example: $400,000

The Ministry of Finance's own example is a value of consideration of $400,000, which produces total Ontario land transfer tax of $4,475. Here is how that number is built using the brackets.

• The first slice, up to $55,000, is taxed at 0.5%.
• The slice from $55,000 to $250,000 is taxed at 1.0%.
• The slice from $250,000 to $400,000 is taxed at 1.5%.
• Added together, the three slices come to $4,475.

The key point is that you do not pay 1.5% on the whole $400,000. Each rate touches only its own slice of the price, so the higher rates apply only to the dollars above each threshold.

What counts as the value of the consideration

The tax is based on the value of the consideration, which is wider than the sticker price. It includes the purchase price, any liabilities assumed, benefits conferred, soft costs and the cost of upgrades. It does not include HST paid on the purchase price.

This matters most on new builds and unusual deals, where upgrades or assumed obligations can push the value above the headline price. If your agreement has extras like these, ask your lawyer how they will be treated.

How and when the tax is paid

Land transfer tax is payable on every conveyance of land tendered for registration. Under the Land Transfer Tax Act, s. 2(1), it is paid when the conveyance is tendered for registration or before then, so in practice you pay it on closing.

Electronic registration is mandatory in Ontario, except for complex registrations, and the land transfer tax statements are completed as part of the electronic transfer. Only authorized Teraview account holders and their registered users, such as lawyers and conveyancers, can create and submit documents in the system. Exactly how the money reaches the registry on closing day depends on your agreement and your lawyer's process, so it is worth confirming with your lawyer.

What can change your bill

• First-time homebuyer refund: up to $4,000 for conveyances on or after January 1, 2017. You must be at least 18, must never have owned a home or an interest in a home anywhere in the world, and must occupy the home as your principal residence within nine months of the transfer.
• Spouses: if your spouse owned a home while married to you, you do not qualify for the refund, and neither spouse can get it.
• Joint buyers: if one buyer is not a first-time buyer, the refund is reduced and is proportionate to the interest acquired by the buyers who qualify.
• Citizenship: for agreements signed after November 14, 2016, buyers must be Canadian citizens or permanent residents. A buyer who is not one at closing has 18 months after registration to become eligible and apply.
• Transfers between spouses or former spouses: exempt only if the sole consideration is assuming a registered encumbrance such as a mortgage, or the transfer complies with a written separation agreement, or it complies with a court order.
• Non-Resident Speculation Tax (NRST): 25% of the value of the consideration, effective October 25, 2022. It applies to residential property anywhere in Ontario bought by foreign nationals, foreign corporations and taxable trustees, and it is charged in addition to land transfer tax.

The first-time buyer refund can be claimed at registration through the electronic land transfer tax affidavit. If it is not claimed then, you pay the tax and apply to the Ministry of Finance, within 18 months after the conveyance is registered.

For NRST, a foreign national is an individual who is not a Canadian citizen or permanent resident, and First Nations individuals registered under the federal Indian Act are excluded. Exemptions and rebates exist in some cases, so a buyer in this position should get advice before signing.

What to do next

• Work out the bracket calculation on your expected price, adding any upgrades or assumed liabilities but not HST.
• If you are buying in Toronto, add the City's municipal land transfer tax separately, since it is charged on top of the provincial tax.
• Tell your lawyer early if you or a co-buyer have ever owned a home, so the refund is claimed correctly.
• Confirm your citizenship or permanent residence status for both the refund and NRST.
• If you are transferring a home between spouses or former spouses, have the written separation agreement or court order ready.
• Budget for the tax as cash due on closing.

Every purchase has its own facts, so a real estate lawyer can confirm the exact amount and any refund before closing.

Frequently asked questions