Real Estate
The Ins and Outs of LTT in Ontario
There are many fees associated with buying a property. From realtor commissions to utility costs, the list can go on. Another fee which often flies under the radar is the Land Transfer Tax (LTT). If you aren’t familiar with it, we’re here to give you a quick run-through of it. Here in this article, we talk about the ins and outs of LTT in Ontario.
What is LTT?
LTT (also known as the Property Transfer Tax) was first introduced in Ontario and Quebec during the 1970s and in BC during the 1980s. Certain metropolitan areas may also have a municipality LTT. For example, homebuyers in Toronto will pay double what their counterparts in Ottawa pay.
Who Pays For It?
In general, the home buyer of a property will pay the LTT to the province and/or municipality; the sellers never pay this tax. Your lawyer will arrange for LTT to be paid when the deed to the new home is transferred in your name (on closing day).
How Much Will It Cost Me In Ontario?
In most provinces the tax is calculated based on the purchase price of the home and the marginal tax rate. Here in this article, we’ll be discussing about LTT for the Province of Ontario. For more information about calculating LTT for other provinces, you can find it here.
To Calculate Ontario LTT:
- 0.5% of the value of the property up to and including the first $55,000
- 1% of the value which exceeds $55,000 up to and including $250,000
- 1.5% of the value which exceeds $250,000 up to and including $400,000
- 2% of the value between $400,000 and $2,000,000
- 2.5% for amounts exceeding $2,000,000, where the land contains one or two single family residences
If you’re buying a home in Toronto, you’re especially unlucky as there is a municipality LTT. So you pay twice as much compared to the rest of the home buyers in Ontario. Toronto’s LTT applies within the following boundaries: Steeles Avenue as the North border, Etobicoke as the West border, Scarborough as the East border and Lake Ontario as the South border.
To Calculate Toronto LTT:
- 0.5% up to and including the first $55,000
- 1% of the value which exceeds $55,000 up to and including $250,000
- 1.5% of the value between $250,000 and $400,000
- 2% of the value between $400,000 and $2,000,000
- 2.5% of the value over $2,000,000
When Do I have to Pay?
Typically, you have to pay the LTT when homeownership is transferred over to you on closing day. As such, your lawyer will arrange for LTT to be paid as the the deed/title to your new home is being transferred over to you.
First Time Home buyers Incentives!
As a first time home buyer, it can get quite expensive. Fortunately, there are government incentives to help out first time home buyers. The Ontario LTT refund is equal to the full value of the land transfer tax up to a maximum of $4,000.
To be eligible for Ontario first time home buyer LTT refund:
- The buyer must be a Canadian citizen or permanent resident of Canada
- The buyer must be older than 18 years
- The buyer must occupy the home within nine months of purchase
- The buyer cannot have owned a home anywhere in the world
- The buyer’s spouse cannot have owned a home while being your spouse
Based on Ontario’s LTT rates, the refund will cover the fully taxed amount on homes with a purchase price of $368,000. For homes over $368,000, homebuyers will receive the maximum $4,000 refund and have to pay the remaining LTT balance. To obtain this refund, you need to apply within 18 months after the purchase of the home. Your lawyer can help you with the refund application process.
Similarly, there is also a first time home buyers LTT rebate for new and resale homes in Toronto are they are eligible to receive a rebate up to a maximum of $4,475.
To be eligible for Ontario first time home buyer LTT refund:
- The buyer must be a Canadian citizen or permanent resident of Canada
- The buyer must be older than 18 years
- The buyer must occupy the home within nine months of purchase
- The buyer cannot have owned a home anywhere in the world
- The buyer’s spouse cannot have owned a home while being your spouse
Can I Be Exempted from Paying LTT?
In some specific cases, a homebuyer can be exempted from paying LTT. In Ontario, if you transfer property to a spouse during separation proceedings, you don’t have to pay LTT provided the transfer meets one of the three following conditions:
- the transfer is mandated by a court order;
- both parties have agreed to the transfer in writing; and
- the land is given without consideration in return, except for an encumbrance (meaning your spouse can’t pay you for the property, but can take over the mortgage).
Other LTT exemptions include, but are not limited to:
- 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 a charity.
For more information, you can find out about LTT and exemptions here.
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