In Ontario, if you buy land (or an interest in land), you are required to pay land transfer tax. This amount must be paid whether the sale is registered at one of the province’s land registry offices. “Land” includes the following:
- Buildings to be constructed
- Fixtures (light fixtures, built-in appliances, and cabinets)
How Land Transfer Tax is Calculated
The amount of land transfer tax payable is based on the amount you paid for the land. It is calculated as follows:
- 0.5 percent of the first $55,000
- 1 percent of amount which exceeds $55,000 up to and including $250,000, and
- 1.5 percent of the amount which exceeds $250,000, and
- 2 percent of the amount exceeding $400,000 for land that contains at least one and not more than two single family homes
Harmonized Sales Tax and Buying a Home
On July 1, 2010, the Ontario Government introduced the Harmonized Sales Tax (HST) to most purchases and transactions. It applies to the purchase of newly-constructed homes but not resale homes. Buyers of new homes receive a rebate of $24,000, regardless of how much they paid for their home to help defray the cost of this tax.
When the Land Transfer Tax is Paid
The land transfer tax is paid when the transfer of the land is registered.
Land Transfer Tax Refund for First-time Homebuyers
If you are a first-time homebuyer, you may be eligible for a refund of some or part of the land transfer tax. You can make an application to the government for a refund within 18 months of the date of the transfer.
The maximum amount of the refund that you can claim is $2,000. You have the option of making your claim at the time of registration, which may offset the amount of land transfer tax you would ordinarily be required to pay.
If you don’t claim your refund at the time of registration, you will be required to pay the full amount of the tax owing. You would then submit a claim for a refund to the Ministry of Finance. You can find a list of the documentation required for an application to be processed at the Ministry of Finance website.