When buying a home in Canada, you need to be aware of one big fee you’ll be paying to the government. And that is Land Transfer Tax. All provinces in Canada charge their Land transfer tax except Alberta and Saskatchewan. These two provinces do not charge a tax but they charge a much smaller fee.
What is the Land Transfer Tax?
Land transfer tax is a tax that must be paid when the land has been transferred from one owner to another, and this tax is paid by the buyer of a property. So when you are purchasing a property, you must pay land transfer tax to the province where the property is located at the time when the ownership of the property is being transferred from the previous owner to you, and the tax is paid at closing.
How much is the Land Transfer Tax?
There are two components that determine the tax amount.
The first component is the PURCHASE PRICE. The tax is calculated as a percentage of the purchase price – which means the higher the price the higher the tax.
The second component would be the PROVINCE where the property is located. Each province has its own tax rates and therefore the tax would be different for each province.
Let’s take a look at a real case scenario to see how the tax can be different for each province when comparing the same purchase price of $500,000. If this house was located in Ontario, the tax would be $6,475. If it was located in BC, the tax would be $8,000. Or if located in Alberta, there would be no tax, only $420 transfer fee.
If you are a first-time homebuyer, you might be eligible for a rebate. If you are a first-time homebuyer buying a house in Ontario, BC or Prince Edward Island, I encourage you to learn more about your options or ask your real estate agent or your mortgage agent to help you out.
Land Transfer Tax when purchasing $800,000
Let’s assume that the buyer is a Canadian citizen or a permanent resident buying a house outside of Toronto. If the purchase price was $800,000, the provincial land transfer tax would be $12,475.
If the home was in Toronto, the result would double since for Toronto purchases a municipal land transfer tax applies as well. And the total of these two taxes would be $24,950.
If you are a first-time home buyer purchasing outside of Toronto, you might be eligible for a rebate of $4,000. And if the home was in Toronto, the rebate might increase by another $4,475 to the total rebate of $8,475. In that case, the total land transfer tax would be $16,475.
Land Transfer Tax Rebate
To be eligible for a refund when purchasing a home in Ontario, you have to meet the following criteria:
- You must be a Canadian Citizen or a Permanent Resident of Canada
- You must be at least 18 years of age
- You must occupy the home as your principal residence within 9 months of purchase
- You cannot have owned a home anywhere in the world
- Your spouse cannot have owned a home while being your spouse
The key takeaway is that you do not have to be a tax expert when purchasing a property in Canada. But you should know about this huge expense and get ready to pay for it at closing.
