When purchasing a home in Canada, land transfer taxes are an essential cost that must be paid by every buyer, regardless of whether it’s their primary residence or not. These taxes, which are calculated based on a percentage of the home’s price, vary depending on your location and the cost of the property. In general, the higher the price of the home, the higher the tax will be. The specifics of how much you’ll pay depend on whether the tax is provincial or municipal.
Table of Contents
What Are Land Transfer Taxes?
Land transfer taxes are fees charged by provincial and municipal governments when you purchase property. These taxes are calculated based on the purchase price of the property rather than the assessed value, mortgage amounts, or any other debts. Some provinces, like Alberta and Saskatchewan, don’t charge land transfer taxes at all, while other regions, such as Ontario, impose both provincial and municipal taxes.
How Land Transfer Taxes Are Calculated
Land transfer taxes are typically a percentage of the purchase price, not the appraised or resale value of the property. This percentage can vary depending on where you’re purchasing your home, and some regions may also calculate taxes based on the property’s fair market value.
In Ontario, for example, land transfer taxes follow a specific structure outlined in the Land Transfer Tax Act, which was initially established in 1990 and amended in 2021. In some cases, the tax applies to various property types, including residential, commercial, and land sales. There are also exceptions to consider, such as the tax applied when transferring leases longer than 50 years or transferring land from a corporation to a shareholder.
Ontario’s Land Transfer Taxes
In Ontario, land transfer taxes are based on the home’s purchase price. Here’s the breakdown:
- 0.5% on the first $55,000
- 1% on the next $195,000 (from $55,001 to $250,000)
- 1.5% on the next $150,000 (from $250,001 to $400,000)
- 2% on the next $1.6 million (from $400,001 to $2,000,000)
- 2.5% on any amount over $2,000,000
For example, if you purchased a home worth $300,000, you would pay:
- $275 on the first $55,000 (0.5%)
- $1,950 on the next $195,000 (1%)
- $750 on the final $50,000 (1.5%)
This totals $2,975 in land transfer tax for a $300,000 home. However, if you were purchasing in Toronto, the total tax would double since Toronto has its own municipal land transfer tax, adding another $2,975, for a total of $5,950.
First-Time Home Buyer Rebate
Ontario offers a rebate for first-time homebuyers, which can reduce the amount of tax you owe. Eligible buyers can receive up to $4,000 back, which applies to homes purchased up to $360,000. If your land transfer taxes exceed this amount, you can still get up to $4,000 back, but you’ll be responsible for paying the remaining balance.
To qualify for this rebate, buyers must meet certain conditions, including being over 18, a Canadian citizen or permanent resident, and moving into the property within nine months of purchase. Additionally, neither the buyer nor their spouse can have previously owned a home. The home must also meet the eligibility criteria for warranty if it is new.
What If You Don’t Live in Ontario?
For those purchasing a property in Ontario but who are not residents, additional rules apply. The Greater Golden Horseshoe region (which includes the Greater Toronto Area) imposes a 25% speculation tax on foreign buyers, designed to help curb foreign investment and allow more local residents to buy homes. This tax applies to both residential and commercial properties.
Municipal vs. Provincial Taxes in Ontario
In most of Ontario, the land transfer taxes consist solely of the provincial rate. However, Toronto is an exception. In addition to the provincial tax, Toronto residents must also pay a municipal land transfer tax. The rates are the same for both provincial and municipal taxes, meaning the total land transfer tax you’d pay when purchasing a home in Toronto can be up to double the rate in other parts of Ontario.
Special Situations and Exemptions
While most buyers will need to pay land transfer taxes, there are some exemptions. For instance:
- Transfers between spouses in some cases
- Transfers of farmed land between family members
- Transfers of life leases from a non-profit or charity
Foreign nationals, whether individuals or corporations, are subject to the Non-Resident Speculation Tax (NRST) in addition to land transfer taxes. This tax is 25% of the purchase price, further adding to the cost for non-residents buying property in Ontario.
Other Costs to Consider
Beyond land transfer taxes, homebuyers in Ontario should also prepare for municipal property taxes, which are assessed based on the property’s value. Buyers are responsible for paying any remaining property taxes from the previous year, as part of the closing costs.
Additionally, HST (Harmonized Sales Tax) applies to newly built homes but is not required for resale properties. Buyers of new homes may also qualify for a HST rebate of up to $24,000 on the provincial portion of the tax.
A Guide to Day Trading Taxes in Canada
11 Essential Family Benefits and Tax Tips for Canadian Parents in 2025
7 Expert-Recommended Tips to Maximize Your Tax Refund in Canada This Year
What Tax Refund You can Get in Canada 2025?
Tuition Tax Credit in Canada: How it works in Each Province
GIS Payment Increase 2025: Check out the Payout
How to Pay Land Transfer Taxes
In Ontario, land transfer taxes must be paid when the land transfer is registered with the land registry office. Buyers have 30 days after the closing date to submit payment and paperwork. The tax is payable to the Minister of Finance.
In Conclusion
Land transfer taxes are a significant part of the home-buying process, particularly in Ontario, where both provincial and municipal taxes may apply. Buyers should carefully consider these costs and take advantage of rebates and exemptions where eligible. By understanding the tax structure and calculating the fees upfront, homebuyers can better prepare for the financial commitment of purchasing a property.