The tricky ins and quirky outs of Land Transfer Tax

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Legal Matters by Jeffrey D. Cowan

Published: December 09, 2009 11:17 p.m.

Last modified: December 09, 2009 11:22 p.m.

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Q. I am a first time homebuyer and I don’t understand what I am supposed to budget for Land Transfer Tax. Can you help?

A. The answer is not as simple as one might think but here are some of the basic points:

• If you are a first-time homebuyer and you are purchasing in the City of Toronto — bound by Steeles Avenue, western Etobicoke, eastern Scarborough and Lake Ontario — and your purchase price is under $400,000.00 then you are exempt from the Municipal Land Transfer Tax.

Over that price you will have to pay a portion of land transfer tax. If you are buying outside of those geographical boundaries, there is no Municipal Land Transfer Tax payable.

• For first time homebuyers throughout Ontario, you receive a rebate for the first $2,000 payable or approximately the first $200,000 in purchase price. However, this is where it gets a bit tricky.

• If you are buying the house with someone, and they are not first-time purchasers you may still be eligible for a provincial rebate if you have not co-habited with them during the time that they owned their home. However, if you have owned a home anywhere in the world you are not eligible for the first-time homebuyer’s provincial tax rebate.

• Some people purchase homes in percentages in order to take advantage of one person’s tax rebate status. A typical set up would be that the person who is eligible for the rebate will purchase 99 per cent of the home while the unrebatable person only takes a one per cent ownership.

• The rules can be tricky and you should consult with you lawyer so you can properly budget for the tax as it can form a fairly substantial cost (especially if you are buying in Toronto). Information and calculation formulas are available on the internet to assist you. Best of luck.

– Jeffrey Cowan is the principal with Cowan Taylor and McGee, Barristers & Solicitors. The information in this article should not be relied upon as legal advice.

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