Q: I am a first-time homebuyer in Toronto and I am entirely confused about what land transfer tax is and how much I will have to pay.
A: For many first-time homebuyers, the new Toronto Municipal Land Transfer Tax (MLTT) and the existing Provincial Land Transfer Tax (PLTT) can be difficult to understand and potentially provide a barrier to buying your first home. Here are some tips you should know when setting out a budget for that transaction:
>> If you are a first-time homebuyer and your purchase price is under $400,000, you are exempt from paying the MLTT. Even if the price is over this threshold, you will get a rebate on the first $400,000 of tax owing.
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>> If you are a first-time homebuyer and you are purchasing a new construction, you automatically receive up to a $2,000 rebate from the province under PLTT. Even if you are purchasing from an owner who is reselling a new home, as long as the property has had no one reside in it, you may still be eligible to receive this rebate.
>> The Ministry of Finance is now implementing a new rebate for resale homes up to $2,000 for first-time homebuyers. The catch here is that you have to pay the full tax on closing and then wait for the proposed Bill to be passed into law before you get that rebate back from the Ontario government.
>> If you are purchasing the property with a partner/spouse you may be eligible for a partial rebate if one of you has owned a home before ‘any where in the world’ while the other is a first-time homebuyer.
>> The general rule of thumb if you are not a first-time purchaser is that both the MLTT and PLTT are approximately each 1.5 per cent of the purchase price. However, this is a sliding scale making the taxes greater for more expensive properties (tax the rich and feed the poor).
>> The land transfer tax must be paid along with all other expenses on the closing of the transaction.
Regardless if you are eligible to receive a rebate or not, land transfer tax can be a potentially large expense that purchasers must factor into their closing budgets.
Your lawyer can assist you in determining exactly what is payable on closing and should have an up-to-date understanding of Land Transfer Tax regardless of whether you live in Ottawa, Toronto, or Barrie.