Who Pays Land Transfer Tax in Ontario?

For someone buying land for the first time, the term land transfer tax may seem very foreign. This component of the deal is often overlooked and rarely discussed in the realm of real estate.

However! We are here to break that stigma and tell you everything you need to know about land transfer tax so that you know exactly what to expect when you buy a home!

What is Land Transfer Tax?

Land Transfer Tax (LTT) is a provincial government fee imposed when property ownership is transferred, covering the administrative costs associated with this change.

It’s a one-time payment, due before the property officially closes.

Who Pays Land Transfer Tax?

In Ontario, the buyer of the property is responsible for paying the Land Transfer Tax.

Sellers may have their own closing costs, but they are not responsible for funding or reimbursing the cost of the LTT. The Land Registry Office will register the change in ownership and then have a statement prepared entailing the details of the amount owed.

Looking for more rural real estate resources? Check out these blogs next!

How is Land Transfer Tax Calculated?

Land Transfer Tax is calculated based on the purchase price of the property. The more expensive the property, the higher the LTT costs will be.

How Much is Land Transfer Tax?

The price brackets for land transfer tax are broken up into tiers. For example, (e.g., 0.5% up to $55,000, 1% up to $250,000, etc.). The price is tiered differently for luxury properties (2 million and above). In this case, a higher rate of LLT will kick in.

Here is the simplest breakdown of the tax:

up to and including $55,000: LTT = VOC × 0.005
exceeding $55,000, and up to $250,000: LTT = (VOC × 0.01) – $275
exceeding $250,000, and up to $400,000: LTT = (VOC × 0.015) – $1,525
exceeding $400,000, for property other than property with one or two SFRs: LTT = (VOC × 0.02) – $3,525
exceeding $400,000, and up to $2,000,000, for property with one or two SFRs: LTT = (VOC x 0.02) – $3,525
for property with one or two SFRs exceeding $2,000,000: LTT = (VOC × 0.025) – $13,525

First Time Home Buyer Rebate

If you are a first-time home buyer, a Canadian resident and over the age of 18, you qualify for the first-time home owner rebate! This means that you can save up to $4000 on your LTT. This is a rebate that can be brought up with your Lawyer and applied for to claim at the time of your home closing.

What Are Some Other Special Clauses and Excemptions?

The LTT process is not always a straightforward process, and there are some instances when tax rates are interchangeable and or not applicable. However, this is solely dependent on the particular circumstances of land transfer.

One of these circumstances is if the land is being transferred into another name because of a divorce or other kind of legal separation. In these cases, you will want to talk to your Lawyer about what applies and what does not.

Another case of LTT being exempt or variable happens when land is transferred from the name of one direct family to the name of another. Typically, the requirement for this is that the family member is blood-related.

However, it is also dependent on the circumstances of the transfer, such as the land being a gift or part of an inheritance. It is key to speak to a Lawyer about the exact measures for these instances.

Hoping to build a custom home in the country? Read these related blogs for more advice.

Land Transfer Tax on Farm Properties

Another case where LTT may fall under an exemption or special clause is in the sale of a farm. Farm properties will have different policies for LT in some cases. However, this is dependent on provincial requirements and the legalities surrounding the transfer of the farm.

Budgeting for Land Transfer Tax

As a buyer, understanding LTT is essential to building your budget. If the property you plan on purchasing or have purchased was at the top end of your budget, knowing the LTT will help you determine how you are going to offset this cost.

If you qualify for certain exemptions, that’s great. If your property does not qualify for a large exemption, you can now budget for your LTT ahead of time that way when closing time comes, you are not surprised with this cost.

In the end, the best thing to do is ask! When it comes to your Lawyer, they are the expert and best person to go to in relation to LTT costs. Your Real Estate Agent will also help guide you along the way, ensuring that everyone is on the same page about these costs when closing time comes.