Ontario Land Transfer Tax: How Much You Will Pay on Closing

Land transfer tax is one of the largest closing costs for many Ontario buyers, and it is due when you take ownership. Knowing how it is worked out helps you budget before closing day.

This article explains the provincial brackets, what is included in the value, how the first-time homebuyer refund works and when the tax is paid. Some properties carry extra taxes, so a lawyer can confirm the final figure for your purchase.

How the tax is calculated

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

As an example from the Ministry of Finance, a value of consideration of $400,000 produces total land transfer tax of $4,475.

Higher rate for larger homes

For land with one or two single family residences, the rate is 2.5% on the part of the value over $2,000,000. Single family residences include cottages and cabins, and the zoning of the land does not matter.

What counts as the value

The value of the consideration 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. So the number used for the tax may differ from the price on the first page of your agreement.

Toronto properties may carry a separate municipal land transfer tax in addition to the provincial tax, and some buyers also face other taxes. Ask your lawyer what applies to your property.

The first-time homebuyer refund

First-time homebuyers can get a refund of up to $4,000 for conveyances on or after January 1, 2017. To qualify, 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.

Several exceptions can change the result:

• If your spouse owned a home while married to you, you do not qualify, and neither spouse can get the refund.
• If you buy jointly with someone who is not a first-time buyer, the refund is reduced and is proportionate to the interest acquired by the buyers who qualify.
• For agreements signed after November 14, 2016, you must be a Canadian citizen or permanent resident; a buyer who is not one at closing has 18 months after registration to become eligible and apply.

The refund must be applied for within 18 months after the conveyance is registered. It 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.

When the tax is due

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

Electronic registration is mandatory in Ontario, except for complex registrations, and 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. In practice, your lawyer handles this and collects the tax from you before closing.

Transfers between spouses or former spouses are exempt only if one of three conditions is met: the only consideration is assuming a registered encumbrance such as a mortgage, the transfer complies with a written separation agreement, or it complies with a court order.

What to do next

• Confirm the full value of the consideration, including any assumed liabilities and upgrades.
• Work out the tax bracket by bracket, or ask your lawyer for the figure.
• Check whether you and any spouse or co-buyer qualify for the first-time refund.
• Plan to occupy the home as your principal residence within nine months if you are claiming the refund.
• Budget for closing costs more broadly; the Financial Consumer Agency of Canada suggests 1.5% to 4% of the purchase price.
• Ask whether any municipal or other taxes apply to your property.

Frequently asked questions