In late 2007 the City of Toronto enacted their own Land Transfer Tax. For closings Feb 1, 2008 and later, for any real estate purchased within the Toronto city boundaries, there is now a second tax to pay, in addition to the existing Provincial Land Transfer Tax! This new double tax only applies within the city of Toronto. Homebuyers who purchase a house in area code 905 only pay the single, provincial tax. Both the Ontario and the Toronto Land Transfer Taxes are payable in full on the closing day (the day you get the keys to your new property), and these taxes form a significant part of overall closing costs for you, the buyer.
Toronto Land Transfer Tax Formula
The formula for calculating the new City of Toronto Land Transfer Tax is as follows:
- for a purchase price up to $55,000: multiply price x 0.5% *
- for a purchase price from $55,001 to $400,000: multiply price x 1.0% and deduct $275
- for a purchase price over $400,000: multiply price x 2.0% and deduct $4275.00
Using the above formula, you can see that for a purchase of a house or condo at a price of $400,000, the Toronto land transfer tax to pay would be: $400,000 x’s 2% = $8000 minus $4275 = $3725, or nearly 1 per cent
Remember, the Toronto tax is an extra tax which is in addition to the Ontario tax payable.
*for lower amounts, note that this new tax can apply to the sale of a condominium locker or parking space, for example
First Time Buyers’ Exemption
First time buyers have an exemption, if the residential property they are purchasing is less than $400,000, there is no City of Toronto land transfer tax to pay. This, of course, is separate from the requirements of the Ontario Land Transfer Tax, where a differrent formula applies.
Land Transfer Tax on Commercial Properties
Different rules and rates apply for non-residential properties, i..e commercial properties. With new home construction, rates are calculated net of HST. It’s best to check with a real estate professional or lawyer, to have a full understanding of what taxes you are required to pay when buying non-residential properties.
author: Randy Selzer