What to Know About Ontario’s Land Transfer Tax (Guide by Mississauga Real Estate Lawyers)

Houses are a substantial investment. Besides your down payment and purchase price, Ontario homeowners also need to pay for utility hook-ups, home inspections and moving costs. There’s also the land transfer tax

But how much you pay on the latter depends on your property’s value. And it must be paid in full before the title is transferred.

If you are unfamiliar with Ontario’s land transfer tax or need help understanding its basics, our real estate lawyers in Mississauga have prepared this short guide. It addresses the fundamentals to help you understand it better and take the right steps.

Let’s dive right in.

Real Estate Lawyers in Mississauga Provide a Guide to Ontario’s Land Transfer Tax 

Here is a quick guide on what you need to know about the land transfer tax in our province.

What is the land transfer tax? 

Ontario’s land transfer tax is a provincial tax levied on an individual purchasing a property. It is typically calculated as a percentage of your home’s value and can be significant, especially on those homes priced higher than average. Homebuyers tend to forget about this expense, but, unless you receive a full rebate, there is no way to avoid it. And it must be paid up front.

Who needs to pay the land transfer tax? 

Typically, individuals purchasing condominiums and houses in Ontario need to pay this tax when buying a property. (Sellers don’t have to.)

Your real estate lawyer can arrange for this tax to be paid once the deed is transferred in your name, which will happen on closing day.

If you’re a first-time homebuyer, you may be eligible for a refund of all or part of the tax under the Land Transfer Tax Refund Program

How is the tax calculated? 

How is the tax calculated

The land transfer tax is based on the evaluated price of your property. This depends on the total paid, including any debt or mortgage assumed as a part of the purchase. In addition, you may have to pay a municipal land transfer tax.

Are there any exemptions? 

Ontario’s property buyers enjoy a few land transfer exemptions. These include when a house is being transferred between former or existing spouses or from a family member to a family business.

When is the land transfer tax paid?  

This tax typically needs to be paid as soon as the new owner takes possession of the property. For this, you will need your property lawyer to arrange for the payment to be made as soon as the deed is transferred into your name on closing day.

Keep in mind that this tax is a one-time payment, unlike annual property taxes.

How can a homeowner get a land transfer tax rebate, and how is it generally paid?  

Homeowners can claim a rebate on their land transfer tax in one of three ways. However, certain criteria need to be met, such as Canadian citizenship, age, and whether you are a first-time homebuyer.

  • Homebuyers need to go to the Electronic Land Registration System and choose the code that applies to their land purchase.
  • Those choosing the land registry office or paper register can expect to receive a refund immediately upon filing the paperwork. In the case of paper registrations, the lawyers of qualifying taxpayers or the individuals themselves can claim an immediate refund when filing the land transfer refund affidavit. This is applicable for first-time homebuyers of eligible properties in Ontario.
  • Homebuyers can also make a claim to the Ministry of Finance when a claim can’t be registered. Furthermore, the claim can be paid by direct deposit by filling out a direct deposit request form.

Purchasing a new home or condo in Ontario can be an exciting but overwhelming experience. While it’s a solid investment, you must make sure you are properly protected and that all legal issues are addressed, especially when it comes to taxes. Whether or not you’re a first-time homebuyer, it’s necessary to factor in the time and budget required for the land transfer tax. Also, be sure to discuss potential fees with your real estate lawyer in Mississauga to ensure you aren’t caught off-guard during your closing.