What is the Ontario Land Transfer tax? Simply put, the Ontario Land Transfer Tax is a provincial tax payable by the buyer of a home upon taking possession of the property. So, if you purchase a property or land you are responsible for paying Land Transfer Tax to the province at the time the transaction closes. If the property you are purchasing is located in Toronto you will also be subject to the Municipal Land Transfer Tax. This is an additional tax that you are required to pay as well.
The buyer’s lawyer will pay the Land Transfer Tax on behalf of the purchaser on the closing date. The buyer will be required to provide their solicitor closing funds (certified) that will cover the closing expenses.
So then how is this tax calculated? Well, the tax is calculated on the value of the consideration for the transfer. In certain circumstances the Land Transfer Act (Act) deems the value of the consideration to be the fair market value of the land. On transfers of residential real property in Ontario, Land Transfer Tax (LTT) is calculated on the purchase price (less a HST calculation, if the property purchased is a newly built home). The LTT is payable by the purchaser on the purchase price upon registration of a Transfer/Deed of Land in the Ontario Land Registry Office on closing based on the following upward sliding scale:
• 0.5% on the first $55,000 of the purchase price, plus;
• 1.0% on the amount exceeding $55,000 up to and including $250,000, plus;
• 1.5% on the amount exceeding $250,000 up to and including $400,000, plus;
• 2.0% on the amount over $400,000
Although this was a brief article on Ontario’s Land Transfer Tax, I hope that I provided you with a brief insight into the most important expense that a home buyer will face. As an agent, it is very important to educate your buyer clients on the land transfer tax so that on closing day they are well aware of what to expect.