Land Transfer Tax Rebates

Land Transfer Tax Rebates

 

Land Transfer Tax Rebates for First Time Home Buyers

In yesterday’s article called Ontario & Toronto – Residential Land Transfer tax, I covered the basics of Provincial and Municipal land transfer tax scheme and basic calculations. Today, I would like to focus again on Land Transfer Tax rebate for First Time Home Buyers and misconceptions about tax credits.

When dealing with first time home buyers, one of the most common misconceptions that I hear is “I’m a first time home buyer, I don’t need to pay the land transfer tax!”  And what a big misconception it is!  Everyone, regardless if you have bought a home previously or are a FTHB, you must pay Land Transfer Tax to the Provincial and/or the Municipal government in Ontario.  However there are tax credit rebates for those that qualify as a FTHB that makes it seem that you are not paying any tax.  Most real estate agents and lawyers do not take enough time to explain this fully to their clients.

The Ontario and Municipal governments provide tax credits so that the cost to purchase a home is more achievable for first time home buyers.  The tax credit / rebates do not seem much in comparison to the overall purchase price of your new home, but trust me – every bit helps – and they can add up to big savings.

The FTHB tax credit rebates are as follows:

Land Transfer Tax Credit Rebates
Region Rebates Up To
Ontario Provincial: $2,000.00

Toronto Municipal:

$3,725.00
Total Maximum LTT Rebate: $5,725.00

 

You might be thinking,“So GREAT!  the above tax credit rebates will cover the Land Transfer Taxes and I don’t really need to pay!”, but it is not as simple as that.

As mentioned in my previous post “Ontario & Toronto – Residential Land Transfer tax“, the Land Transfer Tax is based on the property purchase price and as the property price increases, so does the taxes and the Tax Credit Rebates mentioned above might not cover all the taxes that are required to be paid.   Really?  Yes REALLY!  Let’s take a couple of examples.

Land Transfer Tax and Rebate Examples
Property Price
LTT Taxable
(PLTT + MLTT)
LTT Rebate
(PLTT Rebate) + (MLTT Rebate)

Taxes Due
(PLTT + MLTT)

$225,000 $1,975 + $1,975 = $3,950 $1,975 + $1,975 = $3,950 $0 + $0 = $0.00
$300,000 $2,975 + $2,725 = $5,700 $2,000 + $2,725 = $4,725 $975 + $0 = $975
$500,000 $6,475 + $5,725 = $12,200 $2,000 + $3,725 = $5,725 $4,475 + $2,000 = $6,475
$800,000 $12,475 + $11,725 = $12,200 $2,000 + $3,725 = $5,725 $10,475 + $8,000 = $18,475

The land transfer tax credit rebates will pay up to $2,000.00 for properties bought in Ontario and if purchased in the municipality of Toronto of $3,725.00 for a total maximum rebate of $5,725.00.   Any tax calculated over these rebates must be paid when the property is registered.

 

Land Transfer Tax Eligibility & Questions


[learn_more caption=”Ontario – Provincial Land Transfer Tax Credit Rebate Eligibility”] The Ontario land transfer tax rebate is equal to the full value of the land transfer tax up to a maximum of $2,000.

Eligibility:

  1. The buyer must be older than 18 years
  2. The buyer must occupy the home within nine months of purchase
  3. The buyer cannot have owned a home anywhere in the world
  4. The buyer’s spouse cannot have owned a home while being your spouse
  5. If you are purchasing a new home, it must be eligible for home warranty

Based on Ontario land transfer tax rates, the rebate will cover the fully taxed amount on houses up to $227,500. For houses over $227,500, home buyers will receive the maximum $2,000 rebate. To obtain this refund, you need to apply within 18 months after the purchase of the home.

Souce: Ontario Ministry of Revenue, “Land Transfer Tax Refund for First-time Homebuyers”[/learn_more]

[learn_more caption=”Toronto – Municipal Land Transfer Tax Credit Rebate Eligibility”] First-time home buyers in Toronto of new and resale homes are eligible to receive a refund up to a maximum of $3,725.

Eligibility:

  1. The buyer must be older than 18 years
  2. The buyer must occupy the home within nine months of purchase
  3. The buyer cannot have owned a home anywhere in the world
  4. The buyer’s spouse cannot have owned a home while being your spouse
  5. If you are purchasing a new home, it must be eligible for home warranty

Based on Toronto land transfer tax rates, first-time home buyers with homes of $400,000 or less will avoid the tax altogether.

Source: City of Toronto, “Municipal Land Transfer Tax”

[/learn_more]

[learn_more caption=”Buying a Home with My Spouse / Partner, but I have owned a home before?”] My spouse or partner and I are buying our first home together. I have owned a home before, but sold it before we became spouses. My spouse has never owned a home. Does she qualify for the First-time Homebuyers Refund?

Yes, even though you are not a first-time homebuyer, your spouse may claim a refund up to the maximum, as long as you did not own a home while you were each others “spouse.” Where a husband who is not a first-time purchaser and a wife who is a first-time purchaser, purchase a home together, the wife may claim the land transfer tax refund with respect to her interest.

The wife may also claim a refund of land transfer tax with respect to her husband’s interest, if he sold his interest in all homes that he previously owned before becoming her spouse. For land transfer tax purposes, “spouse” means either of two persons who are married to each other, or who are not married to each other and who have cohabited:

  • continuously for a period of not less than three years;
  • or in a relationship of some permanence, if they are the natural or adoptive parents of a child.

Source: Land Transfer Tax – Frequently Asked Questions

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First time home buyers or FTHBs receive a multitude of help in the form of rebates, plans and tax credits from the provincial and municipal government to make home ownership achievable. A complete overview of all rebates, plans and tax credits can be found in my previous post First Time Home Buyers – Plans, Rebates and Tax Credits.

Please contact Nicholas Chan for further information on purchasing a home, how to claim the Land Transfer Tax Rebates! Contact me at (416) 889-6906 or by email at Nicholas.Chan@century21.ca or by clicking here. Or you could always fill out the form below.