Ontario Land Transfer Tax: Helpful Info You Need To Know
Who Pays The Ontario Land Transfer Tax?
As a local Toronto realtor, a pretty common question that my real estate clients ask me all the time is, who pays the Ontario Land Transfer Tax on a Toronto home purchase? There’s often some confusion as to who is responsible for paying it and how does it apply to a home purchase. The most common question is whether it’s the homebuyer or home seller who is responsible for paying the tax? The simple answer to that question is it is the home buyer who is 100 percent responsible for paying the Ontario land transfer tax. This applies to the purchase of a condo or house in Ontario.
In fact, a homebuyer in Ontario is actually taxed twice for the privilege of purchasing a Toronto neighbourhood house or condo. The homebuyer must pay both a municipal and a provincial land transfer tax when making their purchase, as both levels of government have ensured that they get a piece of every transaction to fill their coffers. Although that’ really nothing new when it comes to how government operates and how deep their hand goes into the pocket of the average homebuyer in Ontario.
How Much Is The Ontario Land Transfer Tax?
Once you get the past the initial shock of the greedy government taxing you to death on the purchase of a home, there is a basic formula you can use to calculate how much the Ontario land transfer tax will ultimately cost you. This will help you budget for your home purchase as you can input any purchase price into the calculator and have an accurate understanding of the tax amount to be charged. That’s because the formula is essentially based on the purchase price of the home.
There are plenty of Ontario land transfer tax calculators to help you figure out the exact cost for your own home purchase and I highly recommend making your calculations first as you determine your overall budget to purchase a home and ensure you have the funds available for your closing costs too.
Let’s say for instance that you purchased a $1 Million dollar home in Toronto. If you use your trusty tax calculator, the total Ontario land transfer tax amount you need to pay would be $32,950. And remember, this is an amount on top of the purchase price that you’re responsible for at closing. And to put that amount into perspective, that’s more than 3 percent of the total home price.
All homebuyers must pay the tax at the time of closing. You can’t write off land transfer taxes either. And you can’t roll it into your mortgage to finance the payments over years or decades.
In the meantime, you’re basically just handing over a large bag of cash to the Ontario government for the privilege of being able to buy a property in Ontario.
What About First Time Home Buyers?
First-time home buyers in Toronto do receive some relief in the form of tax rebates. First time home buyers receive up to a maximum of $4,000 from the province and $4,475 from the City of Toronto. And it’s a one time deal only for first time buyers.
The greatest irony regarding the tax is that it’s a steep fee to pay for the privilege of buying a home. Ironically, the provincial and municipal governments are claiming to be working on solutions to promote housing affordability. It doesn’t seem very affordable to most homebuyers. Find out more information now on the Ontario land transfer tax to help you plan for your next purchase.