In October of 2007, the City of Toronto passed a Toronto Land Transfer Tax. Since land transfer taxes are due on closing, the purchaser must have these additional funds on hand on the closing day. Closing costs may not be amortized in the mortgage.

For many home buyers, this tax will be charged in addition to the Ontario Land Transfer Tax already in place.

When does the new tax take effect?

Agreements signed on or before December 31, 2007 with a closing before February 1, 2008

--> no Toronto Land Transfer Tax

Agreements signed after December 31, 2007 with a closing after February 1, 2008

--> Toronto Land Transfer Tax payable.

What is the rate to be applied to purchases?

0.5% of the sale price up to and including $55,000;

1% of the sale price between $55,000 up to and including $400,000;

2% of the sale price exceeding $400,000.

For example, a purchaser of a property with a price of $600,000 would pay:

$8,475 Ontario Tax

$7,725 Toronto Tax

$16,200 total Land Transfer Tax

Is there a rebate for first-time purchasers?

Yes, a rebate of up to $3,725 will apply to first-time purchasers of both new and existing homes. This means a full rebate for first-time buyers of homes valued at $400,000 or less. For example, a first-time purchaser of a home valued at $600,000 would pay land transfer tax according to the scale shown above, and receive a rebate of $3,725. A first-time buyer of a home valued at $300,000 would get a full rebate on the land transfer tax.

This is a major difference compared to the Ontario Land Transfer Tax, which limits the rebate to new purchasers of new property only (builder purchases). As well, the provincial rebate is limited to the first $2,000 of the total tax amount due. Thus a first time purchaser of a new property with a purchase price of $600,000 would pay:

$6,475 Ontario Land Transfer Tax ($8475 less $2000 credit)

$7,725 Toronto Land Transfer Tax

$14,200 total Land Transfer Tax

Are commercial properties treated differently?

Yes. In a measure aimed to promote affordable rental housing, the TLTT has been capped at 1.5% on commercial properties. This includes multi-residential units exceeding $400,000 and up to $40 million. The city appears to be lowering the threshold for qualifying a multi-residential property at 2 or more units to include duplexes and other legal non-conforming apartments.