You are required to pay Land Transfer Tax when you buy land in Ontario. Land is defined as any property with or without a building, a building that is to be built, or fixtures including appliances and cabinetry. The tax is paid to the province when the purchase closes and it is normally based on the amount paid for the land in addition to the amount remaining on the old mortgage or debt that is assumed as part of the purchase agreement. Sometimes it is based on the market value of the land.
If you’re purchasing a newly constructed home, the Harmonized Sales Tax will apply. If you are buying a new home, you are also entitled to a rebate of up to $24,000 or 8 percent of the HST. You can contact the HST rebate center at the Canada Revenue Agency by calling 1-800-959-1953 for more information.
If you’re a first-time homebuyer, there’s some good news. You may be eligible for a full or partial refund of the tax. At the time of registration, you can claim a maximum sum of $2,000 for a refund. The refund is designed to offset the Land Transfer Tax that is ordinarily payable. If the refund isn’t claimed at registration, it can be claimed directly from the Ministry of Finance within 18 months of the purchase. No interest will be paid on refunds that are delayed in claiming.
In order to qualify, you must be at least 18 years old and you must live in the home as your primary residence. You must not have ever owned an eligible home in the past and the same goes for your spouse. You can apply for your refund by submitting the required documents under the “explanation tab” of the Land Transfer Tax statements or by filing for a Land Transfer Tax Refund Document at the Land Registry Office in Ontario.
Other Land Taxes
Local municipalities in Ontario may charge an additional land tax. You can contact your local municipality for more information. If the property you are purchasing is located in an area without a municipal organization, property tax will be collected through the provincial land tax program that is run by the Provincial Land Tax Office in Thunder Bay.
The tax rate is calculated using the value of the home or the sales price. The following guidelines will help you determine what your tax will be:
5% up to and including $55,000
1% above $55,000 up to and including $250,000
5% above $250,000
2% above $400,000 where the land contains one or two single family residences