When you’re buying a home, an additional cost to the home purchase that is often overlooked is the cost of the LTT, or Land Transfer Tax. In Ontario, LTT is an amount paid upon the closing of a home sale based on the amount paid on the land. While the LTT is the responsibility of the buyer, it is important for all parties to understand how the tax works.
Does Everyone Pay LLT?
Essentially, the tax was put in place as an additional fee for the transfer of a property from one owner to another. In layman’s terms, this means that when you buy a home, you pay the province a tax to process the transfer of ownership. However, there are some exceptions of the rule.
Transferring between spouses: If the ownership of a property is transferring between a married couple, even in death or separation, the transfer may be exempt from the LTT.
Transferring to personal business: If the owner is transferring the property over to their personal business, the transfer tax may be excused.
Transferring farm land within family: If the property in question is being used as income-producing farmland, the transfer, provided it remains within family, may be exempt from LTT.
Inheritance: If a piece of property is inherited through death, it may be exempt from land transfer tax, provided the receiver is using it as a primary residence, not a vacation or secondary home.
What About First Time Home Buyers?
While Ontario is infamous for granting benefits to first-time home buyers, the law of Land Transfer Tax is no different. Generally, as a first-time home buyer, you would not be exempt from the tax, but would be eligible for a partial or full refund of the taxes paid. Even more to the plus side, there is no time restriction to apply for the refund. So even after years of owning your home, you can still get your LTT refunded so long as you submit the correct paperwork to support the claim. The typical refund caps off at about $2,000, which is approximately the tax on a home valued at approximately $230,000 in today’s Ontario market.
How Much Is The Tax?
In order to find the exact amount of Land Transfer Tax you would be paying on your purchase, there is a basic conversion chart. While the tax amount has some wiggle room depending on the exact cost of the home, here is what you can expect to pay based on the value of your purchase.
$1 – $55,000 = 0.5% LTT
$55,001 – $250,000 = 1% LTT
$250,001 – $400,000 = 1.5% LTT
$400,001 & over= 2%
When looking to buy a new home, the cost of Land Transfer Tax should always be taken into consideration, but not used as a deterrent from buying your dream home. While it’s additional cost can be a hindrance, it can generally be an affordable payment worked into the final closing costs of your home. If you have any questions about LTT or whether you’re eligible for a refund, give me a call at 705 315-0516. I am always here to help ease your mind and help you find a stress-free mortgage solution.