Toronto Land Transfer Tax Guide

What Is Land Transfer Tax?

Land transfer tax (LTT) is a one-time tax paid by the buyer whenever property changes hands in Ontario. It is calculated as a percentage of the purchase price and is due on closing day. If you are buying in Toronto, you pay two separate land transfer taxes: one to the Province of Ontario and one to the City of Toronto. This double tax is one of the most significant closing costs for Toronto buyers.

Land transfer tax is not included in your mortgage. It must be paid out of pocket on closing day, which means you need to budget for it separately from your down payment.

Ontario Land Transfer Tax Rates

The Ontario LTT is calculated on a marginal rate system, similar to income tax brackets. The rates apply to the portion of the purchase price within each bracket, not the entire amount. The current Ontario LTT brackets are:

• 0.5% on the first $55,000
• 1.0% on $55,000.01 to $250,000
• 1.5% on $250,000.01 to $400,000
• 2.0% on $400,000.01 to $2,000,000
• 2.5% on amounts over $2,000,000 (for single-family residences)

For a home purchased at $800,000 in Ontario (outside Toronto), the provincial LTT would be approximately $12,475. For a $1,000,000 purchase, it would be approximately $16,475.

Toronto Municipal Land Transfer Tax

Toronto is the only municipality in Ontario that levies its own additional land transfer tax. The Toronto MLTT rates closely mirror the provincial rates but apply on top of them. The current Toronto MLTT brackets are:

• 0.5% on the first $55,000
• 1.0% on $55,000.01 to $250,000
• 1.5% on $250,000.01 to $400,000
• 2.0% on $400,000.01 to $2,000,000
• 2.5% on amounts over $2,000,000

This means a buyer purchasing a $800,000 home in Toronto pays approximately $12,475 in provincial LTT plus $12,475 in municipal LTT, for a combined total of roughly $24,950. That is a substantial amount that must be available in cash on closing day.

First-Time Buyer Rebates

Ontario offers a first-time home buyer rebate of up to $4,000 on the provincial LTT. This effectively eliminates the provincial tax on the first $368,000 of a purchase. To qualify, you must be at least 18 years old, a Canadian citizen or permanent resident, and you must not have owned a home anywhere in the world at any time.

Toronto offers a separate first-time buyer rebate of up to $4,475 on the municipal LTT. This covers the municipal tax on approximately the first $400,000 of a purchase. You must meet similar eligibility requirements and must occupy the home as your principal residence within nine months of purchase.

If both spouses are first-time buyers, you can claim the full rebate. If only one spouse qualifies, you can claim a proportional share based on your ownership interest.

How LTT Affects Your Budget

Land transfer tax can add tens of thousands of dollars to your closing costs. Here are some examples for properties in Toronto (combined provincial and municipal LTT, before any rebates):

• $500,000 purchase: approximately $12,950 combined LTT
• $700,000 purchase: approximately $20,950 combined LTT
• $900,000 purchase: approximately $28,950 combined LTT
• $1,200,000 purchase: approximately $40,950 combined LTT

First-time buyers in Toronto purchasing at $500,000 could save up to $8,475 through the combined provincial and municipal rebates, reducing their LTT to approximately $4,475.

Buying Outside Toronto

If you purchase in the 905 regions such as Mississauga, Brampton, Markham, Vaughan, Oakville, or any other municipality outside Toronto's city limits, you only pay the Ontario provincial LTT. There is no municipal land transfer tax in these areas. This can represent savings of $10,000 to $20,000 or more compared to buying in Toronto.

This difference in land transfer tax is one reason some buyers choose properties just outside Toronto's borders. For example, purchasing a $900,000 home in Mississauga versus Toronto would save you approximately $14,475 in municipal LTT alone.

Tips for Managing Land Transfer Tax

• Start saving for LTT early, as it cannot be financed through your mortgage
• Check your eligibility for first-time buyer rebates well before closing
• Consider properties outside Toronto's municipal boundaries to avoid the double tax
• Factor LTT into your total budget from the beginning of your home search
• Your real estate lawyer will handle the LTT payment and rebate application on closing day