The Land Transfer Tax Increase – What You Need to Know
If you have bought a home in the City of Toronto since 2008, you’re likely familiar with the Municipal Land Transfer Tax (MLTT).
If you’re not familiar with the fee, it is a one-time tax paid by a City of Toronto homebuyer when they purchase a property. The fee is part of closing costs and must be paid in cash; it cannot be rolled into a homebuyer’s mortgage. This detail is important for prospective buyers to consider when budgeting for the purchase of a new home.
This tax is also levied on top of the provincial portion of land transfer taxes, resulting in approximately double what homebuyers in other municipalities pay. This tax reportedly results in over $500M in revenue for the City of Toronto.
The City of Toronto MLTT Changes
As of January 1st, the municipal land transfer tax has a new structure.
The changes focus on luxury home purchases. What constitutes a luxury home? Any home in the City of Toronto that has a Value of Consideration of $3 million or greater, and contains a maximum of two single-family residences. This new tax starts at 3.5% of the value of the home.
Here is how the new MLTT escalator looks:
- Over $3 million to $4 million – 3.5%
- Over $4 million to $5 million – 4.5%
- Over $5 million to $10 million – 5.5%
- Over $10 million to $20 million – 6.5%
- More than $20 million – 7.5%
Existing Rates
For homes with a Value Consideration of up to $3 million, the following rates still apply and were effective as of September 6th, 2023:
- Up to $55,000 – 0.5%
- $55,001 to $250,000 – 1.0%
- $250,001 to $400,000 – 1.5%
- $400,001 to $2 million – 2.0%
- $2 million+ to $3 million – 2.0%
Please note that these percentages are paid on each escalator. So, if you are purchasing a home for $950,000, your MLTT is $275 + $1,950 + $2,250 + $11,000 = $15,475.
For the Ontario portion, the rates are a little different:
- Up to $55,000 – 0.5%
- $55,001 to $250,000 – 1.0%
- $250,001 to $400,000 – 1.5%
- $400,001 to $2 million – 2.0%
- $2 million+ – 2.5%
In the case of a $950,000 home purchase, the provincial tax bracket calculations would be:
$275 + $1,950 + $2,250 + $11,000 = $15,475
In summary, if you bought a home for $950,000 in the City of Toronto, your land transfer taxes would be $15,475 (City of Toronto) + $15,475 (Province of Ontario) = $30,950.
Rebates
But, if you are a first-time homebuyer, there are rebates available to you. Ontario offers a $4,000 rebate, while the City of Toronto will rebate first-time homebuyers with $4,475. Eligibility is dependent on these requirements of the homebuyer:
- Canadian Citizenship or Permanent Resident Status
- 18 years of age or older
- Must occupy the home within nine months of purchase completion
- Must apply for the rebate within 18 months of purchase completion
- The homebuyer’s spouse must not have been a homeowner while acting as their spouse
- The spouse could have previously owned a home, however.
- A newly constructed home must qualify for a home warranty