When buying a home there are often associated costs that buyers are unaware of, especially if it is a first home purchase. Land Transfer Tax is one of those sneaky costs that typically adds a few thousand dollars to your upfront expenses. Fortunately, those buying in Simcoe County only get hit with it once, unlike Toronto buyers who also have to pay a Municipal Land Transfer Tax (ouch!).
So what exactly is Land Transfer Tax?
This is a tax paid to the province by a buyer upon closing of a property that they have acquired. It is typically based on the price paid for the property plus any amount remaining on any mortgage or debt assumed as part of the sale. There are exemptions and special situations, however, these do not affect the majority of real estate transactions in Ontario.
How is Land Transfer Tax calculated?
Currently land transfer taxes are calculated by applying the below rates to the value of the property:
0.5% up to an including $55,000
1.0% above $55,000 up to and including $250,000
1.5% above $250,000
2.0% above $400,000 where the land contains one (1) or two (2) single family residences.
To put that into perspective, we’ll calculate the land transfer tax (LTT) for the ‘average’ home in Barrie, which as of March 2016 cost $379,227.
LTT = Value x 0.5% 55,000 x 0.5% = $275
LTT = Value x 1.0% 195,000 x 1.0% = $1,950
LTT = Value x 1.5% 129,227 x 1.5% = $1,938.405
Total Land Transfer Tax = $4,163.40
*There are also some handy calculators online for those of you not feeling up to math today!
Is there any way to pay less?
While there aren’t exactly discounts, there are refunds available for first-time homebuyers! In order to qualify, individuals must not have purchased or held interests in a home before and be using the property as their primary residence. To see if you qualify for part or all of your First-time Homebuyer’s Refund, view the eligibility requirements or speak to your lawyer. This refund can be claimed up to 18 months after the purchase of your home.
Have more questions about Land Transfer Tax? Post them in the comments and we’ll be sure to get them answered!