About Land Transfer Tax

On Wednesday, March 1st the latest change to land transfer tax in Ontario will take effect. In the blog post I wrote called “Demystifying Closing Costs” I introduced the topic of the land transfer tax. Today, I’ll go into it in a bit more detail and include some of the recent and upcoming changes to land transfer tax here in Ontario.

In a nutshell, land transfer tax is payable by the buyer when they purchase a property. There are differences in LTT if the property being purchased is commercial, so for the purposes of this article, I will only cover LTT on residential re-sale properties.

In Ontario we have a provincial land transfer tax and the City of Toronto charges a municipal land transfer tax. (So far Toronto is the only municipality able to do this, although other Ontario municipalities have approached the provincial government for permission to do it too. So far, the province has not agreed.)

For illustration purposes the LTT on a $1 million single-family home purchase in Mississauga would be $16,475.00. As of March 1, 2017 the same home in Toronto would be subject to Municipal Land Transfer Tax (MLTT) of $16,475.00 in addition to the LTT for a total of $32,950.00.

Both the provincial government and the City of Toronto have recently made changes to the land transfer tax formula.

The Ontario government announced a change to the LTT on properties over $2 million – on January 1, 2017 the rate of LTT on the price over $2 million changed to 2.5% rather than the previous 2%.

Effective March 1, 2017 the City of Toronto will harmonize MLTT rates with the LTT meaning the portion of the residential resale purchase price of between $250,000 and $400,000 will now be taxed at the rate of 1.5% rather than 1%, a difference of $750.

If there is one bit of good news in the face of these tax increases, it is that both governments have taken steps to protect the first-time buyer. The provincial government doubled the LTT rebate for eligible first-time buyers from $2,000 to $4,000 while the City added $750 to the previous rebate of $3,725 for a total MLTT rebate of $4,475. A first-time buyer in Toronto who qualifies for both rebates will now save $8,475 dollars on their total payable land transfer tax.