Real estate purchases in Ontario are subject to a provincial land transfer tax. This tax is paid by the buyer of the property and it is calculated as a percentage of the purchase price (use this free tool to calculate the amount of land transfer tax on a specific property).
For example a home that sells for $300,000 will owe $2,975, and a home that sells for $400,000 will owe $4,475 in Ontario land transfer tax.
Since 2007 the Ontario government has offered a rebate to eligible first time home buyers for up to $2,000 of the land transfer tax. In November of 2016 the Ontario government announced that the maximum amount of the rebate will increase to $4,000 starting in January 2017.
This means you can purchase a home up to $368,000 and receive a rebate for the full amount of the Ontario land transfer tax! Homes sold over this price will receive the maximum $4,000 rebate and the purchaser will be required to pay the remaining tax.
To receive the rebate you must meet the following conditions:
- You must be 18 years or older
- You must occupy the home within 9 months of purchase
- You cannot have owned a home or interest in a home anywhere in the world
- Your spouse cannot have owned a home while being your spouse (but may be a previous home owner)
- If the home is newly constructed, it must be eligible for home warranty
- Home buyers must apply for the refund within 18 months of purchase
Typically your lawyer will apply for the rebate during your purchase and the rebate will be applied immediately to your tax bill. Alternatively, if the rebate is not claimed at the time of registration, the full tax is paid and a refund claim can be made to the Ministry of Finance within 18 months.