If you’re buying your first home in Ontario, whether it is a new home build or a resale property, you may be eligible for a land transfer tax refund of all or part of that tax, up to the maximum of $4,000.
When you purchase a house, condo, or land in Ontario, buyers must pay land transfer tax upon the close of a purchase. But as a first-time homebuyer, you may be eligible to receive some financial relief on closing costs.
If you, or your spouse at the time of purchase, have never owned property in Ontario or anywhere else in the world, your real estate lawyer can complete and sign an Ontario Land Transfer Tax Refund Affidavit for First-Time Purchasers of Eligible Homes form. As a qualified purchaser(s), you would be entitled to a proportional share of the land transfer tax refund of up to $4,000 on the registration date of the home purchase.
In the instance that the first-time homeowner is married and their spouse has owned a home before they married but has not owned a home during the period of their marriage, then the first-time homebuyer may also claim a refund in proportion to his or her spouse’s interest to a maximum of $4,000.
However, if a first-time homeowner is married and their spouse has had an ownership interest in an eligible home whether in Ontario or anywhere in the world, while they were spouses of one another, no refund is available to either spouse.
How much is land transfer tax in Ontario?
For homebuyers, the amount of land transfer tax and potential tax refund varies depending on home cost.
To help newcomers enter the housing market, the Province doubled the maximum refund for first-time homebuyers from $2,000 to $4,000 in January 2017. With the increased maximum, no provincial land transfer tax would be payable by qualifying purchases on the first $368,000 of the value of the consideration for eligible homes.
Homebuyers can use this calculator to determine applicable land transfer tax.
Who is eligible?
Eligibility requirements vary depending on the circumstances surrounding who has interest in a property. For instance, if a child is purchasing a home with their parent, and the parent goes on title for 50% interest in the property, then the child as a qualified first-time homebuyer would eligible for an exemption of 50% of the land transfer tax, or $2,000.
However, if a parent goes on title but does not acquire a beneficial interest in the property (for instance, the purpose was 1% property interest at the insistence of the bank for mortgage qualifying purposes) then it would be necessary to file a claim directly with the Ministry of Finance. If the Ministry is satisfied that the parent is holding the 1% in trust for the child, then the child could qualify for the full refund of $4000.
The first-time homebuyer’s refund program is restricted to Canadian citizens and permanent resident of Canada. Further, your partner’s eligibility for a refund depends on whether you are spouses as defined in section 29 of the Family Law Act.
Procedures to Apply for Refund
Visit the Ministry of Finance website for detailed information on eligibility requirements and how to apply for a Land Transfer Tax Refund. The Ontario Ministry of Finance can also be contacted directly at:
Ministry of Finance
Land Taxes Section
33 King Street West, 3rd Floor
Oshawa, ON L1H 8H9
The Land Transfer Tax Refund, that this article addresses, pertains to provincial land transfer tax. Some local municipalities (e.g., Toronto) can charge their own land transfer tax. If you have questions about municipal property tax, contact your local municipality.
Cheryl Stelzer is a sole practitioner in Guelph Ontario, specializing in Family Law, Real Estate and Estate matters. Cheryl’s goal is to empower clients in moving forward in attaining their goals. If you require legal advice please contact her by email or by phone at 519-822-6089.