Many homebuyers forget about the biggest closing
cost about purchasing a home, which is land transfer tax. All provinces in Canada levy
their own tax, except Alberta and Saskatchewan, which instead charge a much smaller fee. We’ve
brought in Toronto Real Estate Lawyer Shadi Nasseri to walk you through the ins and outs
of calculating your land transfer tax.
Marginal tax rates for land transfer taxes vary from province-to-province. However, since
the method of calculating land transfer taxes is similar across the country, we’re going
to focus on an Ontario example.
In Ontario, there are four possible tax rates. They range from point five per cent all the
way down to two per cent.
Let’s say you’re purchasing a property in Hamilton for two hundred and seventy-five
thousand dollars. Since the value of your home falls into the third margin, between
two hundred and fifty thousand and four hundred thousand dollars, we need to do three separate
calculations to figure out your land transfer taxes.
The first calculation is on the first fifty-five
thousand dollars of your purchase price. We take that number and we multiply it by zero
point five per cent and we get a total value of two hundred and seventy-five dollars.
Next, you’ll need to calculate the tax for
the second margin, the amount between fifty-five thousand dollars and two hundred and fifty
thousand dollars. Since the value of your home at two hundred seventy-five thousand
dollars exceeds this margin, we’re going to use the full range. So, we take the two hundred
fifty thousand dollars, we subtract fifty-five thousand dollars and we get total value of
one hundred ninety-five thousand dollars. We take our one hundred ninety-five thousand
dollars and multiply by one per cent, for a total value of one thousand nine hundred
and fifty dollars.
Next, let’s calculate the tax for the third margin. Since our purchase price of two hundred
and seventy-five thousand dollars falls between two hundred and fifty thousand and four hundred
thousand dollars, we don’t need to use the full range. Instead, we take two hundred and
seventy-five thousand dollars, subtract two hundred and fifty thousand dollars and get
a total of twenty-five thousand dollars. We take our twenty-five thousand dollars and
multiply it by the rate of one point five per cent for a total of three hundred and
To determine your total land transfer taxes, we need to add all three figures to get it.
So, we take the two hundred and seventy-five dollars, we add to it the one thousand nine
hundred and fifty dollars and again add the three hundred and seventy-five dollars for
a total amount of two thousand six hundred dollars.
Now, in Ontario, if you’re a first-time homebuyer
you may qualify for rebates of up to two thousand dollars. So, in this example, that would bring
your land transfer taxes down to just six hundred dollars.