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 Land Transfer Tax in Ontario: What It Is and How It’s Calculated 

What is Land Transfer Tax?

Land Transfer Tax (LTT) is a tax levied by the government of Ontario on the purchase or transfer of real estate property. It is paid by the buyer and applies to both residential and commercial property transactions. The amount of LTT depends on the purchase price of the property, and it is due on the closing day of the sale.

How is Land Transfer Tax Calculated in Ontario?

In Ontario, Land Transfer Tax is calculated as a percentage of the property's purchase price. The formula varies depending on the price of the property. Below is a breakdown of the rates:

First $55,000:

• 0.5% of the purchase price
• $55,000.01 to $250,000:
• 1% of the purchase price
• $250,000.01 to $400,000:
• 1.5% of the purchase price
• $400,000.01 and above:
• 2% of the purchase price

Example:

If you purchase a property for $500,000 in Ontario, here’s how the Land Transfer Tax would be calculated:

• 0.5% on the first $55,000 = $275
• 1% on the next $195,000 ($55,000 to $250,000) = $1,950
• 1.5% on the next $150,000 ($250,000 to $400,000) = $2,250
• 2% on the remaining $100,000 ($400,000 to $500,000) = $2,000

Total Land Transfer Tax = $275 + $1,950 + $2,250 + $2,000 = $6,475

Municipal Land Transfer Tax (Toronto)

If you're purchasing property in Toronto, you will also be subject to an additional Municipal Land Transfer Tax. The rates are similar to the provincial rates, but with slightly different thresholds:

• First $55,000:
  • 0.5%
• $55,000.01 to $250,000:
  • 1%
• $250,000.01 to $400,000:
  • 1.5%
• $400,000.01 and above:
  • 2%

For properties in Toronto, the LTT can be double the amount of the provincial tax.

Exemptions and Rebates

Ontario offers a First-Time Homebuyer’s Rebate for eligible buyers, which can significantly reduce the amount of Land Transfer Tax payable. The rebate is available for homes up to $368,000, and eligible first-time buyers can receive up to $4,000 off their provincial tax.

For homes in Toronto, there is a Toronto First-Time Homebuyer’s Rebate that can also reduce or eliminate the municipal Land Transfer Tax for eligible buyers.

Conclusion

Land Transfer Tax is an important consideration when purchasing property in Ontario. By understanding how it’s calculated, you can better plan for the costs associated with your real estate transaction. If you're unsure about how much tax you’ll be required to pay or whether you qualify for any rebates, consult with an experienced real estate lawyer to guide you through the process.