Buying real estate is probably one of the biggest and most daunting purchases in your lifetime. The government wants to encourage people to buy real estate in the country and as a provincial incentive, you can qualify for a First-Time Home buyer rebate off the Land Transfer Tax payment.
What is Land Transfer Tax?
Land Transfer Tax (“LTT”) is an Ontario tax imposed on the purchaser and otherwise transferee of a property purchase transaction. The tax is calculated on the value of the consideration (transfer/acquisition amount) and is only exempt in several title transfer transactions, where the transfer is for nominal consideration. To find out if a transfer would constitute an exemption, please contact your preferred real estate lawyer.
Properties being acquired in the City of Toronto, are subject to Municipal Land Transfer Tax as well. It is important to be aware of this prior to purchasing property in Toronto. You are essentially paying double the amount you would otherwise be paying, had you purchased outside Toronto.
The Government offers a first-time home buyer rebate to anyone purchasing property for the first time ever, amounting currently to $4,000 in Ontario and $4,475 in the City of Toronto. That means that if you qualify, your total land transfer tax calculation would be subtracted by either or both of those amounts. To find out if you qualify for the first-time home buyer rebate, contact your preferred real estate lawyer.
Who collects and pays the Tax?
At the time of closing the purchase transaction, your real estate lawyer will calculate all the closing costs associated with the property purchase (i.e.. Legal Fees, Disbursements, Land Transfer Taxes, Title Insurance, etc.) and ask you to provide their office with certified funds. The Lawyer will then remit the collected tax to the appropriate Government service body on closing, following title registration.
LTT and MLTT are a big closing expense when buying property and it is always suggested to speak to a lawyer prior to purchasing property, in order to financially be prepared for it.
Natalie Hamzeh, LL.B. LL.M. https://thelawboutique.ca/