Land transfer tax in Ontario: who pays, how much and what downsizers should budget

Who pays land transfer tax in Ontario

Per Ontario.ca, when you acquire land or a beneficial interest in land, you pay land transfer tax to the province when the transaction closes. That makes it a buyer's cost. It sits alongside your down payment, legal fees and moving costs, and it is due in cash at closing.

For a downsizer this changes the order of the arithmetic. The sale of your current home carries commission, HST, legal fees and a mortgage payout, but no land transfer tax. The tax appears on the next home. The net proceeds guide walks through the seller side, and this page covers the buyer side.

Ontario land transfer tax bands

The rates below apply to agreements after November 14, 2016 and come from Ontario's page on calculating land transfer tax. They are marginal, so each rate applies only to the slice of the price inside its band.

The taxable amount is the consideration. Ontario says that includes the price plus liabilities assumed, benefits conferred and other consideration. For most resale purchases that is the price.

Land transfer tax Ontario calculator: worked examples

Do the sum once by hand and the logic is clear. The $400,000 line is Ontario's own example. The others apply the same bands.

Here is how the pieces build. The first $55,000 at 0.5 percent is $275. The next $195,000 at 1 percent is $1,950. The next $150,000 at 1.5 percent is $2,250. At $600,000 the last piece is $200,000 at 2 percent, which is $4,000, and at $900,000 it is $500,000 at 2 percent, which is $10,000.

You do not need to do this by hand each time. The net proceeds calculator works out the sale side and the land transfer tax on your next home from the same bands, so you can try a few purchase prices and see the tax move. It is an estimate, and your lawyer's closing statement is the final word. Keep your own worksheet of the inputs, so you can update it when an offer is accepted and again when your lawyer sends the statement of adjustments.

No municipal land transfer tax in Waterloo Region

Ontario's page says the City of Toronto is the only municipality that charges its own land transfer tax in addition to the provincial one. So a buyer in Waterloo, Kitchener, Cambridge or the townships pays the provincial tax only.

That matters if you are weighing a move between cities. A buyer purchasing in Toronto pays both taxes, while the same price in Region of Waterloo carries the provincial tax alone. If you are choosing between local options, see where to downsize, because the tax is the same across the Region and the difference lies in the homes, not the rate.

Exemptions, the first-time buyer refund and why downsizers do not get it

Ontario offers a land transfer tax refund to first-time buyers, up to $4,000 for transfers on or after January 1, 2017, which covers the full tax on the first $368,000 of a price. The condition is strict: you must never have owned a home anywhere in the world. Ontario's refund page says previous ownership in a home means you do not qualify.

If you are selling a house you have lived in for decades, the refund is not available to you. Budget the full tax. If someone else will be on title, ask your lawyer how the refund rules apply before you assume anything.

Transfers between spouses

Retirees sometimes add or remove a spouse from title, or move a home into one name. Ontario's page on transfers of land between spouses says these are generally taxed on the consideration given. A pure gift with no consideration produces no tax. Any mortgage assumed or other benefit is consideration and is taxable.

The page lists three exemptions: the only consideration is the assumption of an encumbrance such as a mortgage, the transfer follows a written separation agreement, or it follows a court order. For this purpose, a spouse includes a married partner, an unmarried partner who has lived with you for at least three years, or a partner you have lived with for a shorter time if you are the parents of a child.

Title changes also affect other things, including estate planning and creditor exposure. This is a question for your lawyer before any transfer, not after.

Non-Resident Speculation Tax in brief

Separate from land transfer tax, Ontario charges a Non-Resident Speculation Tax on certain purchases. Per Ontario's NRST page, the rate has been 25 percent since October 25, 2022, across the province. It applies to foreign nationals, foreign corporations and taxable trustees who buy designated land, meaning one to six single family residences. Condo parking and storage units are included from March 2024.

Rebates exist for people who become permanent residents within four years, and there are exemptions, for example for protected persons and spouses of citizens or permanent residents. If you are not a Canadian citizen or permanent resident, or you are buying through a corporation or a trust, speak to a lawyer before you make an offer.

New homes and refund timing

Ontario's land transfer tax page is the place to check whether a refund or exemption fits your purchase. The ones that come up for downsizers are the first-time buyer refund and the spouse rules above, and the HST position on new homes. Ask your lawyer to confirm, before you make an offer, whether anything on that page applies to your purchase, since a refund or exemption is easier to plan for than to chase afterwards.

On new homes, Ontario says HST applies to new or substantially renovated homes, and a rebate of up to 8 percent of the price, to a maximum of $24,000, may apply. The CRA also describes a federal rebate and an Ontario enhanced rebate for new homes, with their own dates, so ask the builder in writing what is included in the price and what is assigned to the builder. See the CRA's new housing rebate page for the current rules. These rebates are about HST, not land transfer tax, and the land transfer tax is still payable on a new home.

If you are claiming a refund, Ontario's page says to apply within 18 months of the transfer date. Your lawyer normally deals with this at closing, so ask whether any refund applies to your purchase before the day arrives.

A downsizer's example: how the tax changes with the price

Here is a simple comparison using the bands above. Suppose you are choosing between a townhouse at $600,000 and a smaller condominium at $400,000. The land transfer tax is $8,475 on the first and $4,475 on the second, a difference of $4,000. The whole difference comes from the $200,000 slice taxed at 2 percent.

The same logic shows why the tax rarely decides a purchase. It is a few thousand dollars on a purchase of hundreds of thousands, and it is paid once. What it does change is the cash you need on the day of closing, which is why it belongs in the plan from the start. The net proceeds guide shows where it sits next to the sale-side costs.

If you are buying a home before selling your current one, the timing of cash matters more. See buy first or sell first, and ask your lender and lawyer how the tax will be funded on closing day.

No tax deduction for a retirement downsize

Some people ask whether the tax can be claimed back as a moving expense. The CRA's moving expenses page says the deduction is for moves related to work, self-employment or full-time study, where the new home is at least 40 km closer. It can include transfer taxes on the new home in that case. A move made to downsize in retirement does not meet that test, so plan on the tax being a cost you carry. Your accountant can confirm.

How land transfer tax fits a downsizer's budget

Think of it as one line on a list of cash needs on closing day. A fair budget for the next home covers the land transfer tax, your lawyer's fees and costs, any title insurance premium, moving costs and a cushion for repairs. Your lawyer and lender can supply written figures for most of these.

• Run the tax at two or three purchase prices, not only your target
• Add it to the cash you need on closing day, separate from your down payment
• For a new build, ask the builder what HST is included in the price
• Ask your lawyer to confirm the taxable amount if you are assuming any debt or the deal has unusual terms
• Keep the closing statement for your records

Buying a smaller home usually means a smaller tax, but the relationship is not one for one, because the bands are marginal and a lower price drops you out of the top band first. If you are deciding between a condo and a freehold home, the comparison of condos, townhouses, bungalows and life leases and the condo buying guide cover the other costs. The buy first or sell first guide covers timing, and the costs and taxes page covers the wider budget.

If you would like to see the numbers for your situation, use the calculator. For property tax, see the property tax relief guide, and for local help the resources page lists who to call.

When you are ready, you can ask for an introduction to an agent on the operating team at eXp Realty. That is not a search of the whole market, and the agent does the buying and selling work.