In Ontario, when you acquire land or a beneficial interest in land and the transaction closes, you pay the province land transfer tax. Land transfer tax is typically calculated on the value of the consideration as defined in subsection 1(1) of the Land Transfer Tax Act. Consideration includes the purchase price, benefits conferred, soft costs, cost of upgrades and liabilities assumed. Often, the value of consideration is the fair market value of the land purchased.
As of January 1, 2017, land transfer tax rates will depend on the date of the agreement of purchase and sale. If an agreement of purchase and sale is entered into after November 14, 2016 the tax rates will be as follows:
- amounts up to and including $55,000: 0.5%
- amounts exceeding $55,000, up to and including $250,000: 1.0%
- amounts exceeding $250,000, up to and including $400,000: 1.5%
- amounts exceeding $400,000: 2.0%
- amounts exceeding $2,000,000, where the land contains one or two single family residences: 2.5%.
In some cases, land transfer tax is not payable on certain transfers of land. Some exceptions include certain transfers between spouses and certain transfers from an individual to his family business corporation. Moreover, a tax deferral of land transfer tax may be available when land is transferred between two affiliated corporations.
First-time home buyers also may be eligible for a rebate of all or part of the land transfer tax. In Ontario, to claim a refund you cannot have owned a home or an interest in a home anywhere in the world, nor can your spouse have owned a home or interest in a home anywhere in the world while she was your spouse.
First-time home buyers are able to claim the rebate at the time of registration. As of 2017, the maximum amount of the rebate available to first-time home buyers is $4,000, which is up from $2,000 in 2016.