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Ontario Land Transfer Tax Changes – Will they benefit or cost you?
Your Outline Financial Team.
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If you are a first-time home buyer, Ontario has some good news to share; however, if you are a repeat buyer looking to spend over $2 million, things just became a little more expensive.
First the good news. If you are a first-time home buyer, and your purchase closes on or after January 1, 2017, your Ontario Land Transfer Tax rebate increases from $2,000 to $4,000. This means you will not pay any Ontario Land Transfer Tax on the first $368,00 of the purchase price which is an increase from the current limit of approximately $227,500. While this change is not expected to materially increase peoples’ ability to afford a home, it does offer a nice boost at their time of closing.
On the other end of the spectrum, effective January 1, 2017 those that purchase for over $2 million will face an increase in their Ontario Land Transfer Tax costs as illustrated by the below chart (note: if a purchaser has entered an agreement of Purchase and Sale on or before November 14th, the current Ontario Land Transfer Tax Scale will still apply):
Current Ontario Land Transfer Tax Scale:
0.5% on the first $55,000 of the purchase price
Plus: 1.0% on the portion of the purchase price from $55,000 to $250,000
Plus: 1.5% on the portion of the purchase price from $250,000 to $400,000
Plus: 2.0% on the portion of the purchase price above $400,000
New Ontario Land Transfer Tax Scale (Effective January 1, 2017):
0.5% on the first $55,000 of the purchase price
Plus: 1.0% on the portion of the purchase price from $55,000 to $250,000
Plus: 1.5% on the portion of the purchase price from $250,000 to $400,000
Plus: 2.0% on the portion of the purchase price from $400,000 to $2,000,000
(new) Plus: 2.5% on the portion of the purchase price above $2,000,000
Examples:
A) First Time Home Buyer with a $500,000 Purchase Price
- Current Ontario Land Transfer Tax = $4,475
- Revised Ontario Land Transfer Tax After Jan 1, 2017 = $2,47
- (note: if the buyer is also subject to the Toronto Land Transfer Tax, there would be an additional $2,000 in Toronto Land Transfer Tax)
B) Repeat Home Buyer with a $3,000,000 Purchase Price
- Current Ontario Land Transfer Tax = $56,475
- Revised Ontario Land Transfer Tax After Jan 1, 2017 = $61,475
- (note: if buyer is also subject to the Toronto Land Transfer Tax, there would be an additional $55,725 in Toronto Land Transfer Tax)
In addition to the Ontario Land Transfer Tax, there is also the Toronto Land Transfer Tax to consider for those purchasing within the city of Toronto. The current scale for Toronto Land Transfer tax is 0.5% on the first $55,000 of the purchase price; plus 1.0% on the portion of the purchase price from $55,000 to $400,000; plus 2.0% on the portion of the purchase price over $400,000. The current rebate for first-time homebuyers is $3,725.
While nothing has changed with respect to the Toronto Land Transfer Tax, it is possible the municipality will review the current policy over the next number of months considering the recent Ontario changes.
