You have found your dream home or other real estate but do not have much information on the tax implications? If you are purchasing property in Canada, it is possible that land transfer taxes will be part of your closing costs. Land transfer tax is normally based on the amount paid for the land.
Depending on the location you live in, land transfer taxes might be collected either by the municipality or province. It might be referred to with different names or have different versions such as “property transfer tax” in different provinces. It is also notable that certain provinces charge substantially higher transfer fees compared to others.
In Ontario, the provincial government levies a tax on the purchase of a land or an interest in land that is called “Land Transfer Tax” at the time of closing, payable by the purchaser. In case the property you are purchasing is located within the City of Toronto, purchasers will also be required to pay an additional municipal land transfer tax on top of the LTT.
If you are purchasing property, these amounts will be collected by your lawyer and paid upon the closing of the subject property. You might want to check out the official website of the City of Toronto www.toronto.ca/taxes for a comprehensive breakdown of the TLTT calculation formula.
That is why it is important to have a clear understanding of the potential cost of the Land Transfer Tax (and TLTT if applicable) and the payment method while budgeting for your purchase transaction since it will be a significant portion of your closing costs. In addition, it is not the only cost associated with purchasing a home. Some other costs among them are legal fees, home inspection fees, appraisal fees, title insurance fees and your moving expenses.
However, if you are a first-time home buyer in Ontario there are some exemptions and rebates available that can help reduce the amount of the Land Transfer Tax payable in Ontario. You must meet certain conditions to be eligible for this sort of exemptions or rebates.
There are a few exceptional situations where the land transfer tax is not required. Some of them are as follows: certain transfers between spouses, certain transfers from an individual to his or her family business corporation, certain transfers of farmed land between family members, certain transfers of a life lease from a non-profit organization or charity.
If you are purchasing a property in Ontario, contact us today to see how we can assist you with your transaction and provide you with further information!
The information provided above is of a general nature and should not be considered legal advice. Every transaction or circumstance is unique, and obtaining specific legal advice is necessary to address your particular requirements. Therefore, if you have any legal questions, it is recommended that you consult with a lawyer.