What you need to know about recent land-transfer tax changes

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Timothy  Sullivan land transfer tax

On November 14th, Ontario Finance Minister Charles Sousa announced that home buyers will now get a $4,000 rebate on their land-transfer tax (LTT) when purchasing their first home. The provision is expected to take effect on January 1, 2017.  It would double the existing tax break for first-time home buyers already in place. This larger tax rebate means that first-time home buyers will not pay any LTT on the first $368,300 of the cost of their new home.

However, there are some limits on this new tax rebate. For one, it will only apply to first-time home buyers who are Canadian citizens or permanent residents in Ontario. Secondly, it will only apply to properties with one or two single-family residences, so multi-family residential units don’t qualify.

In order to pay for this new rebate, Minister Sousa also announced that Ontario will increase the LTT on homes that sell for more than $2 million by a half-percentage point, from 2 per cent to 2.5 per cent.  This will affect less than 1% of Ontario’s population.

The rest of the LTT will stay the same:

  • 2% tax on homes with purchase prices between $400,000-$2,000,000
  • 1.5% tax on homes with purchase prices between $250,000-$400,000
  • 1% tax on homes with purchase prices between $55,000-$250,000
  • 0.5% tax on the first $55,000 of a home’s purchase price

As of October 2016, the average cost for a single-family detached home is $561,000In Ottawa, the average home price is significantly lower than the provincial average, at $374,000.

Below is a chart demonstrating the land-transfer tax that would be payable for first-time home buyers in Ontario with this rebate. All tax provisions have to pass the Ontario Legislature to become effective.

 

Price of Home

Land Transfer Tax

Tax Payable After Rebate

$55,000 $275 $0
$250,000 $2,225 $0
$350,000 $3,725 $0
No land-transfer tax payable for first-time home buyers up to this amount $368,300 $4,000 $0
Average price of a home in Ottawa $374,000 $4,085 $85
$400,000 $4,475 $475
$450,000 $5,475 $1,475
$500,000 $7,475 $3,475
Average price of a home in Ontario $518,000 $6,835 $2,835
$1,000,000 $16,475 $12,475