What Should Home Buyers know about Land Transfer Tax ?

Certain items are not taxed in Canada for example groceries, prescription drugs, and goods transportation services. The government, on the other hand, has no qualms about taking advantage of homebuyers. When you buy a house, you must pay a land transfer tax.

Depending on the value of the property, this could be a substantial sum of money. If you buy a home anywhere in Canada, you must plan for land transfer taxes and determine whether you qualify. You can also take help from a Land transfer tax calculator. This way, you won’t be hit with an unexpected bill you can’t afford.

Land transfer tax

When calculating the total cost of purchasing a home, the land transfer tax (LTT) is frequently overlooked. Except for Alberta and Saskatchewan, which have much lower transfer fees, all provinces have land transfer fees. The tax is calculated as a percentage of the property’s value in most provinces, using the asking price as a rough estimate. However, Toronto homebuyers must also pay additional city taxes.

Every Province Is Unique

Land transfer tax costs tens of thousands of dollars more in Canada’s most expensive markets, like Toronto and Vancouver than in neighboring provinces. The good news is that if you are a first-time buyer, The good news is that if you are a first-time home buyer, you may be eligible for a substantial discount on most LTT costs.

  • It appears that Vancouver homebuyers are unable to relax: Competing with the highest average home price of $1,103,803 translates to $20,076 in the Land transfer tax calculator or 1.8% of the total purchase price in Vancouver.
  • With a home price in Toronto of $805,320, buyers would have to pay $25,162 in the Land transfer tax calculator or 3.1% of the purchase price.
  • Victoria has seen rapid price growth, with the median home value now standing at $713,485. This equates to homebuyers paying $12,270 in taxes, or 1.7% of the total home price.

Land transfer tax calculator

The purchase price of your property is used to calculate the land transfer tax. Each province, as well as some municipalities, determines its land transfer tax rate. Use the Land transfer tax calculator to find land transfer taxes based on your location, or continue reading to learn how land transfer taxes are calculated in your area.

  • Example of calculation
  • Transfer of land or transfer of a beneficial interest in land for a consideration of $400,000:
  • $55,000 multiplied by 0.5% (55,000 0.005) = $275
  • Add 1.0% (195,000 0.01) to the amount over $55,000 to $250,000 to get $1,950.
  • 1.5% (150,000 0.015) of the amount over $250,000 to $400,000 = $2,250
  • The total amount of land transfer tax to be paid is $4,475.

Who pays the land transfer tax ?

When you purchase land or a valuable interest in land, you must pay land transfer taxes to the province when the transaction is completed.

Land transfer taxes are typically levied on the amount paid for the land plus the balance of any mortgage or debt assumed as part of the purchase agreement.  Land transfer taxes are sometimes based on the fair market value of the land, as in the following example:

  • Transfer of leases with remaining terms of up to 50 years
  • Land transfer from a company to one of its shareholders or 
  • Land transfer to a company if company shares are issued

Plan Ahead for Land transfer tax

Since LTTs cannot be included in mortgages, it is critical for buyers shopping in the most affected markets to factor these costs into their home purchase budget early on. To determine how much to set aside for an LTT, consult with a mortgage expert or financial advisor Mohit Grover or do a Land transfer tax calculator.

This also allows you to assess your financial needs and options, as well as prepare for the home equity loan Canada application process. Make the most of your time with Mohit Grover by asking any questions you have. It may also be beneficial to conduct your research so that you are as informed as possible going in.

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