What You Should Know?
- First-time home buyers in Ontario can receive a land transfer tax refund of up to $4,000
- You’ll receive the maximum Ontario land transfer tax refund amount if you’re a first-time home buyer that is purchasing a home in Ontario with a price of $368,000 or less
- First-time home buyers in Toronto can also receive a municipal land transfer tax rebate of up to $4,475
- If you’re a first-time home buyer in Toronto and your home’s purchase price is less than $400,000, you will receive the full Toronto land transfer tax rebate
- First-time home buyers purchasing a home in Toronto will receive both a municipal tax rebate and a provincial tax rebate
Ontario First-Time Home Buyer Incentive
The Government of Ontario provides incentives to its citizens who are first-time home buyers. You can receive a land transfer tax refund in Ontario of up to $4,000. What this means is if the purchase price of your home is less than $368,000, you would pay no land transfer tax. If the purchase price is greater than $368,000, then you would receive the maximum refund of $4,000. This incentive applies for both new construction and resale homes.
How to Calculate The Ontario Land Transfer Tax Refund Amount
Ontario land transfer tax is calculated based on marginal tax rates based on the purchase price of your home. The Ontario Land Transfer Tax refund applies to the provincial land transfer tax portion. The refund is a flat amount that applies to the tax payable up to a maximum refund limit of $4,000. In other words, you can receive up to $4,000 off the land transfer tax if you are a first-time home buyer in Ontario.
If the land transfer tax payable is less than $4,000, which will happen if your home’s purchase price is $368,000 or less, then you will not have to pay any Ontario land transfer tax. If your land transfer tax payable is more than $4,000, then the amount that you will have to pay will be discounted by $4,000.
Ontario Land Transfer Tax vs Toronto Land Transfer Tax
Did you know that homes purchased in Toronto will be subject to both a provincial land transfer tax and a municipal land transfer tax? Homes purchased anywhere else in the province will only be subject to the provincial land transfer tax. However, the City of Toronto provides support to first-time home buyers by also providing a land transfer tax rebate for new home buyers. While you are subject to both land transfer taxes as a home buyer, you may also be eligible for refunds and rebates for both taxes as well.
Example: $300,000 Home in Sudbury
Suppose you have purchased a home in Sudbury, Ontario for $300,000. Since homes in Sudbury are outside of Toronto, you will only need to pay the provincial land transfer tax. To calculate the Ontario land transfer tax payable, first use the Ontario marginal tax rates to find the tax for each price bracket. Then subtract the tax refund for first-time buyers, up to a maximum of $4,000. The remaining amount is the total land transfer tax payable.
Ontario Land Transfer Tax Rates – $300,000 Home
| Purchase Price of Home | Land Transfer Marginal Tax Fee | Land Transfer Tax Calculation |
|---|---|---|
| First $55,000 | 0.5% | $55,000 x 0.5% = $275 |
| $55,000 to $250,000 | 1.0% | ($250,000 – $55,000) x 1% = $1,950 |
| $250,000 to $400,000 | 1.5% | ($300,000 – $250,000) x 1.5% = $750 |
| $400,000 to $2,000,000 | 2.0% | $0 |
| Over $2,000,000 | 2.5% | $0 |
| Ontario Land Transfer Tax | $2,975 | |
| Ontario Land Transfer Tax Refund | -$2,975 | |
| Total Ontario Land Transfer Tax | $0 | |
In this case, the original land transfer tax amount was $2,975. Since this is less than the maximum tax refund of $4,000, the tax refund cancels out the original tax amount. This means that first-time home buyers will have $0 land transfer tax for a $300,000 home in Sudbury.
Example: $800,000 Home in Mississauga
Let’s say that you’re purchasing a $800,000 home in Mississauga. There’s no municipal land transfer tax in Mississauga, so you’ll only have to pay provincial land transfer tax. The same steps are used as above to calculate the total land transfer tax payable for a first-time home buyer after incentives.
Ontario Land Transfer Tax Rates – $800,000 Home
| Purchase Price of Home | Land Transfer Marginal Tax Fee | Land Transfer Tax Calculation |
|---|---|---|
| First $55,000 | 0.5% | $55,000 x 0.5% = $275 |
| $55,000 to $250,000 | 1.0% | ($250,000 – $55,000) x 1% = $1,950 |
| $250,000 to $400,000 | 1.5% | ($400,000 – $250,000) x 1.5% = $2,250 |
| $400,000 to $2,000,000 | 2.0% | ($800,000 – $400,000) x 2% = $8,000 |
| Over $2,000,000 | 2.5% | $0 |
| Ontario Land Transfer Tax | $12,475 | |
| Ontario Land Transfer Tax Refund | -$4,000 | |
| Total Ontario Land Transfer Tax | $8,475 | |
In this example, the land transfer tax amount of $12,475 is over the maximum refund limit of $4,000. The whole refund amount will apply, but there is still tax leftover. You will need to pay this remaining amount of $8,475.
Article Written by Wowa.ca