Land Transfer Tax When Transferring a Home to Family in Ontario

Many families want to put a home in a child's name, add a spouse to title, or transfer a property as a gift. A common belief is that a gift between relatives is automatically free of land transfer tax. In Ontario, it is not that simple.

This article explains how the tax is measured, what counts as consideration, and how the main family situations are treated. Because a mortgage or other benefit can change the result, get advice on your facts before you sign or register anything.

The starting point: tax is on consideration

The person who tenders a conveyance for registration in Ontario pays the tax on the value of the consideration, payable when the conveyance is tendered or before. The Act does not exempt gifts as such. Tax is computed on the consideration, and where no consideration passes in any form, the tax on nil consideration is nil.

Fair market value is not the general measure of the tax, except where the Act deems it, such as corporation-to-shareholder transfers and leases over 50 years. So the question is usually what the receiving person gives in return, including assuming debt.

Why a mortgage changes everything

Where land is subject to an encumbrance, tax applies to the amount owing at registration, regardless of the relationship between the parties. If a mortgage is assumed or any benefit is given on a spousal or family transfer, it counts as consideration, and the transfer cannot be said to be for nil consideration or natural love and affection only.

In practice, a parent who transfers a mortgage-free home for no payment of any kind is in a different position from a parent who transfers a home that still has a mortgage the child takes over. The rates that apply to the consideration are 0.5% up to $55,000, 1.0% from $55,000 to $250,000, 1.5% from $250,000 to $400,000 and 2.0% above $400,000, with 2.5% on the portion above $2,000,000 where the land has one or two single-family residences.

Transfers between spouses

Transfers between spouses are generally subject to land transfer tax unless a specific exemption applies. Under Regulation 696, the exemption applies only in these cases:

• The only consideration is assuming a registered encumbrance, and tax is then computed on the amount outstanding on registered encumbrances.
• The transfer follows a written separation agreement.
• The transfer follows a court order or judgment.

Spouse follows section 29 of the Family Law Act. Adding a spouse to title with a mortgage on the property is therefore a situation where the tax can apply to the outstanding balance, so confirm with a lawyer before registering.

Other family exemptions and what is not covered

Ontario lists certain family-related exemptions: transfers between spouses (limited), transfers from an individual to his or her family business corporation, certain transfers of farmed land between family members, and certain life lease transfers. The ministry says its list is not exhaustive.

A family transfer may also have income tax consequences, so that is worth raising with your lawyer or accountant.

What to do next

• List every benefit the receiving person gives, including any mortgage they assume.
• Get the mortgage balance owing at the expected registration date.
• Check whether the receiver is a spouse and whether a written separation agreement or court order exists.
• Ask your lawyer to confirm whether any exemption fits your facts.
• Ask an accountant about income tax effects of the transfer.
• Do not sign a transfer describing the deal as a gift until you have confirmed the tax.

Frequently asked questions