What is the Land Transfer Tax?
Real estate transactions are never simple. Without the right lawyer, unless you are a real estate professional, you may expose yourself to risk, but if you have the services of a Toronto real estate lawyer from the beginning of a transaction, you can avoid or reduce most of your risk.
Anywhere in Canada, when you purchase a home or purchase an interest in a property, you will pay a land transfer tax. However, some first-time buyers of eligible homes in Ontario may qualify for a refund of all or part of that land transfer tax.
Which homebuyers qualify for a refund of the land transfer tax in Ontario? Is there a deadline to apply for the land transfer tax refund? If you’ll keep reading this brief explanation of the land transfer tax refund in Ontario, you will find the answers you may need.
Who Collects the Land Transfer Tax?
A land transfer tax is collected by the municipality or province where the land is located. Each province imposes the land transfer tax, but Quebec calls it the “welcome tax,” and Saskatchewan and Alberta call it the “property registration fee.”
Some provinces and municipalities impose considerably higher land transfer taxes than others, but in Ontario, if you’re buying a home for the first time, you may qualify to receive a refund for all or part of your land transfer tax payment.
When Should You Contact a Real Estate Lawyer in Toronto?
Contact an Ontario real estate lawyer whenever you consider a real estate sale or purchase. Your lawyer will review each document in the transaction, ensure the transaction is compliant, and advise against any action or decision that is counter to your best long-term interests.
It’s critical to have a Toronto real estate lawyer explain and help you with the Ontario land transfer tax and land transfer tax refund. The paperwork you must file to receive your refund is quite lengthy and complicated, and any mistake or misunderstanding could cost you dearly.
A land transfer tax is a closing cost you pay when you buy a qualifying property in Canada. Buyers pay this tax, not sellers. The land transfer tax is due when the purchaser takes possession of the purchase, and the tax is paid as a single, lump-sum payment.
Who Qualifies for Ontario’s Land Transfer Tax Rebate?
Only first-time homebuyers in Ontario may qualify for a complete or partial refund of the land transfer tax. To meet the qualifications for the land transfer tax refund:
- You must be 18 years old or older.
- You cannot previously have owned a home or any interest in a home anywhere else in the world.
- Your spouse cannot previously have owned a home or an interest in a home anywhere else in the world during the time he or she has been your spouse.
- The buyer must occupy the home as a principal residence within nine months of the closing date.
- As of 2017, to qualify for the land transfer tax rebate, you must be a Canadian citizen or a permanent resident of Canada.
Buyers who otherwise would qualify for the refund, but who are not citizens of Canada or permanent residents on the closing date have eighteen months from that date to qualify. Upon becoming a citizen or permanent resident, these buyers may apply for the tax refund.
What Properties are “Eligible” Properties?
The land transfer tax refund applies to homes – both new and previously existing – purchased and sold in Ontario after December 13, 2007. The properties and interests that are “eligible” for the land transfer tax refund include (but are not limited to):
- a detached house, a townhouse, a condominium unit, or a residential dwelling that is a duplex, triplex, or fourplex
- a semidetached residence, including a residence that is joined to another residence at the foundation or footing by a wall
- a mobile home that is compliant with the Canadian Standards Association Standard CAN/CSAZ240 MH and is suitable for permanent year-round residential occupation
- a manufactured home built in part or whole at an offsite location and meant for basement installation that is suitable for permanent year-round residential occupation and that is compliant with the Building Code Act of 1992
Can You Calculate Your Transfer Tax and Rebate?
Your real estate lawyer can help you calculate the amount of your land transfer tax and rebate. Ontario sets the land transfer tax amount by using marginal tax brackets based on a home’s price. If you purchase a home for $500,000 in Toronto, for example, you will pay the Toronto land transfer tax as well as the Ontario tax.
You will pay $6,475 for the Ontario land transfer tax and another $6,475 for the Toronto land transfer tax, or a total of $12,950. But in Toronto, as an eligible first-time homebuyer, you may qualify for a municipal refund of up to $4,475 plus a $4,000 refund for the provincial tax.
What is the Deadline to File for the Refund?
A qualifying buyer must apply for the land transfer tax refund within eighteen months after the date of the closing. A number of documents must be included with that application.
Ask a real estate lawyer in Toronto to assist you with the tax refund application so that it is accurate, on time, and complete, and so that no mistakes or misunderstandings on your end delay your refund.
Are There Other Instances Where You Can Avoid the Land Transfer Tax?
In addition to the eligibility of many first-time homebuyers for a partial or total refund of land transfer tax payments, there are also other circumstances where buyers can sometimes avoid the land transfer tax, including:
- the transfer of a property to a child or parent
- the transfer of a property between spouses
- the transfer of a property from a family member to a family business
- the transfer of a farming property between family members
Each municipality and province in Canada has its own rules regarding the land transfer tax, exemptions, and refunds, so you’ll need to be advised by an Ontario real estate lawyer regarding the specific details that will apply to your own real estate purchase.
What’s Important to Remember?
Real estate is a wise investment. Whenever you buy or sell real estate, retaining the services of an experienced real estate lawyer is also a wise investment.
However, you must select a real estate lawyer who maintains the highest professional standards, offers reliable legal advice and services to real estate clients, and works with all parties that are involved to bring your real estate transaction to a smooth, successful outcome.