- A transfer from an estate's personal representative to a beneficiary, satisfying the beneficiary's interest in the estate, is not subject to tax under the Act.
- A sibling who buys the others out for money pays tax on the amount paid plus any mortgage assumed.
- Assumed mortgages and other liabilities count as consideration.
- Even a nil-consideration transfer must be reported correctly on the land transfer tax affidavit.
A parent has died and the family home is part of the estate. One child wants to keep it. Another wonders whether anyone owes land transfer tax just because the title changes hands. The answer depends on how the house moves, not simply on the fact that it was inherited.
This article explains the difference between a true inheritance transfer and a buyout, how mortgages affect the numbers, and what to ask your lawyer.
The basic rule on land transfer tax
Under Ontario's Land Transfer Tax Act, the tax is payable by the person who acquires land or a beneficial interest in land, and it is payable when the transfer is registered. It is normally based on the amount paid for the land, and the amount remaining on any mortgage or debt the buyer assumes is added.
The provincial rates are 0.5% up to and including $55,000; 1.0% over $55,000 to $250,000; 1.5% over $250,000 to $400,000; and 2.0% over $400,000. The rate is 2.5% on the portion over $2,000,000 for land containing one or two single family residences.
Transfer from the estate to a beneficiary
Ministry guidance states that a transfer from an estate's personal representative to a beneficiary, satisfying the beneficiary's interest in the estate, is not subject to tax under the Act. It is reported as nil in paragraph 4 of the affidavit.
In plain terms, if the will leaves the house to you and the estate trustee transfers it to you to satisfy that gift, no land transfer tax applies on that step. You still need a proper transfer document, and the estate trustee needs authority to sign, so it is worth confirming the steps with a lawyer. Only authorized Teraview users can register documents electronically.
When a sibling buys the others out
The result changes if one sibling pays the others for their shares. Guidance distinguishes this from a beneficiary receiving their entitlement. For a sibling who buys the others out for money, the amount paid and any mortgage assumed is consideration.
| Situation | Land transfer tax treatment |
|---|---|
| Estate trustee transfers house to the beneficiary named to receive it | Not subject to tax; reported as nil |
| Sibling pays others cash for their shares | Amount paid plus any mortgage assumed is consideration |
| Buyer assumes a mortgage on the house | Assumed debt is added to the base amount |
| Gift with no consideration in any form | No tax payable; reported as nil |
Where a buyout is part of a larger plan, for example the estate is divided unevenly, how the deal is structured matters. A lawyer can tell you what counts as consideration on your facts.
Mortgages, gifts and co-owners
A gift of land is not exempt from the tax as such. If no consideration passes in any form between the parties, no tax is payable. An outstanding encumbrance is taxed as consideration regardless of the relationship between the parties, with an exception for certain spousal transfers under Regulation 696. So a house with a mortgage can attract tax even if no cash changes hands.
For nil-consideration transfers, the affidavit reports nil in paragraph 4, the relationship and reason in paragraph 5, and encumbrances in paragraph 6.
If the heirs will hold the house together, changing between tenancy in common and joint tenancy between the same parties is not a conveyance, so the consideration is nil. Partition among co-tenants is not taxed if each receives land equal in value to their original interest, and the lands must be contiguous. Note that a deceased tenant in common's interest falls into the estate, while joint tenancy carries a right of survivorship.
Timing, penalties and what to do next
If a change in beneficial ownership is not registered, a return may be required. A Return on the Acquisition of a Beneficial Interest in Land must be filed within 30 days of the change. Failing to file a required return for an unregistered disposition within 30 days may lead to assessment of tax, penalty and interest.
Properties in Toronto may also face a separate municipal land transfer tax, which this article does not cover. Ask your lawyer to confirm local taxes.
- Get the will and confirm who is entitled to the house.
- Find out whether there is a mortgage or other debt registered on title.
- Decide whether the house passes by the will or is being bought out for money.
- Ask your lawyer how the transfer will be reported on the affidavit.
- Confirm the estate trustee has the authority to sign.
- Ask about any municipal land transfer tax.
Frequently asked questions
Do I pay land transfer tax if I inherit a house?
A transfer from an estate's personal representative to a beneficiary, satisfying the beneficiary's interest in the estate, is not subject to tax under the Act. It is reported as nil. Confirm the details of your situation with a lawyer.
What if I buy my siblings out?
The amount you pay and any mortgage you assume is consideration. Tax is calculated using the provincial rate brackets. A lawyer can calculate it for your deal.
Does a mortgage on the house matter?
Yes. Assumed liabilities count as consideration, and an outstanding encumbrance is taxed regardless of the relationship between the parties, subject to a limited spousal exception.
Is there a deadline?
Tax is payable when the transfer is registered. If a beneficial interest changes without registration, a return must be filed within 30 days.
Sources
- Ontario.ca – Land Transfer Tax — ontario.ca
- Ontario.ca – Calculating Land Transfer Tax — ontario.ca
- Ontario.ca – Transactions with Nominal Consideration — ontario.ca
- Ontario.ca – Transfers from Personal Representative of an Estate to an Individual (farmed land) — ontario.ca
- Ontario.ca – Conveyances Involving Trusts — ontario.ca
- Ontario.ca – Register land documents electronically — ontario.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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