The costs associated with purchasing a home can be daunting for homebuyers, and there are a plethora of costs that need to be considered. One such cost is land transfer tax – a tax that is payable to the provincial government whenever property is purchased in the province of Ontario (LTT). If you are purchasing property in Toronto, there is additional land transfer tax payable to the City, called the Municipal Land Transfer Tax (MLTT).

In both cases, the amount of land transfer tax varies depending on the purchase price of the property. Potential homebuyers can use simple land transfer tax calculators provided online to determine how much land transfer tax may be payable.

First-time homebuyer refund

However, if this is your first time purchasing property, you may be eligible for the first-time homebuyer refund. The following will need to apply:

  1. You need to be at least 18 years old.
  2. You must occupy the property as your principal residence within 9 months of the closing date.
  3. You cannot have owned residential property anywhere in the world – not just in Canada.
  4. You must be a Canadian citizen or permanent resident of Canada.

If the above applies to you, then you may qualify for the first-time homebuyer refund and would be eligible for a maximum refund of $4,000 for LTT and $4,475 for MLTT for a total refund of $8,475. The refund would be applied to reduce the total tax payable at the time of registration of the transfer.

Purchasing with a friend or partner

When purchasing a property with another individual who is not a first-time homebuyer, then the refund would be reduced accordingly to the interest acquired by the individual who qualifies for the refund. For example, if you are purchasing property with your friend who is not a first-time homebuyer, then only 50% of the refund would be applicable (only one out of two individuals purchasing the property is a first-time homebuyer).

For married couples, the rebate is an all-or-nothing approach. If your spouse has previously owned a home, that property must have been sold prior to your marriage for the qualifying spouse to claim his or her interest and partner’s interest of the land transfer tax refund (100%). If the spouse sold the property after the marriage date or continues to own that property, then no refund is available to either spouse (0%).

Mills & Mills LLP is happy to assist with any further inquiries you might have regarding land transfer tax and the first-time home buyer refund.

At Mills & Mills LLP, our lawyers regularly help clients with a wide range of legal matters including business lawfamily lawreal estate lawestate lawemployment law, health law, and tax law. For over 130 years, we have earned a reputation amongst our peers and clients for quality of service and breadth of knowledge. Contact us online or at (416) 863-0125.

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