Having your offer accepted is one of the most exciting moments in the home-buying process. However, your euphoric mood can quickly change if you’re not prepared for the costs of closing the sale.
When purchasing property in Toronto, land transfer taxes usually make up the largest single charge as you’re on the hook for both provincial and municipal land transfer tax. Sellers never pay.
The amount owed depends on the purchase price of your new home, whether a house or condo. Taxes are based on a sliding scale.
To calculate, multiply your purchase price by the table of rates that rise with the purchase. (Provincial and municipal land transfer taxes follow the same table.)
- 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.
Simple enough? Okay, not really, so that’s why there’s a land transfer tax calculator, which will crunch the numbers for you.
And you don’t have to worry about personally making the payment. Your lawyer will arrange for it to be made when the deed to your new home is transferred in your name on closing day. The only thing you need to be concerned with is budgeting for this added cost.
Some good news for first-time homebuyers is that they may qualify for a refund.
There is a maximum $4,000 rebate on the Ontario land transfer tax. Based on the province’s land transfer tax rates, this refund will cover the full tax for homes up to $368,333. For homes purchased in excess of this amount, eligible buyers will receive the full $4,000 rebate and pay the remaining land transfer tax balance.
There is also a maximum $4,475 rebate on the Toronto land transfer tax. Based on the city’s tax rate, those who qualify will not have to pay the tax on homes worth $400,000 or less. For homes purchased over this amount, which is likely the case in Toronto, buyers will receive the full $4,475 rebate and pay the remaining land transfer tax balance.