Two Toronto councillors want to see an increase in the municipal land transfer tax rebate for first-time homebuyers.
Right now, the rebate program only provides relief from the municipal portion of the land transfer tax up to a value of $400,000, which equals savings of $4,750. For homes purchased over this amount, buyers must pay the remaining land transfer tax balance.
While helpful, it does not go far enough to assist first-time buyers in a market with sky-high property prices, say the councillors in the motion. As a result, many are choosing to purchase more affordable homes outside of Toronto, to avoid paying the municipal land transfer tax.
The tax was first introduced 12 years ago in response to the city’s structural deficit. Since then, the cost of housing has risen drastically. The average cost of a home in Toronto in early 2008 was approximately $331,000. By the end of 2019, that figure had more than doubled to around $816,000.
The first-time homebuyer rebate applies to both newly constructed and resale residential properties. To qualify, the purchaser must be at least 18 years of age; cannot have previously owned a home or had any ownership interest in a home anywhere in the world; and must occupy the home as their principal residence no later than nine months after taking possession of the property. As well, if married, their spouse cannot have owned a home nor had any ownership interest in a home anywhere in the world while they were the purchaser’s spouse.
Homebuyers are on the hook for both provincial and municipal land transfer taxes if living in Toronto. Sellers never pay.
The taxes are calculated on a sliding scale:
- 5% of the value of the property on the first $55,000; plus
- 1% on the portion between $55,001–$250,000; plus
- 5% on the portion between $250,001–$400,000; plus
- 2% on the portion between $400,001–$2,000,000; plus
- 5% of the value of the property in excess of $2 million, where the land contains one or two single family residences.