When you buy land or an interest in land in Ontario, you pay Ontario’s land transfer tax. Land includes, but is not limited to, any buildings, buildings to be constructed, and fixtures (such as light fixtures, built‑in appliances and cabinetry).
Land transfer tax is normally based on the amount paid for the land, in addition to the amount remaining on any mortgage or debt assumed as part of the arrangement to buy the land.
In some cases, land transfer tax is based on the fair market value of the land, such as in the following examples:
- the transfer of a lease with a remaining term that can exceed 50 years
- the transfer of land from a corporation to one of its shareholders, or
- the transfer of land to a corporation, if shares of the corporation are issued.
Ontario’s land transfer tax (LTT) is calculated using a sliding scale that considers the property’s value. For example, if you purchase a home for $500,000, the tax would be calculated as follows:
- The first $55,000 would be charged at a rate of 0.5%, resulting in an LTT of $275.
- The next $195,000 ($250k-$55k) would be charged at 1%, resulting in an additional LTT charge of $1,950.
- The following $150,000 ($400k-$250k) would be charged at 1.5%, resulting in an additional LTT charge of $2,250.
- The remaining amount over $400,000 (in this case, $100,000) would be charged at a rate of 2%, resulting in an additional LTT charge of $2,000.
The total land transfer tax payable is $6,475.
Some Municipalities also have their own Land Transfer tax (such as Toronto). The above example was only for the Provincial portion.