What is the Land Transfer Tax Rebate and How Does It Work?

Sara Lian
by Sara Lian June 11, 2016 / No Comments

Don’t make the mistake that many first-time homebuyers do: Overlook the land transfer tax (LTT). This closing cost is one in particular that you’ll regret ignoring when estimating how much your first home will cost. Forget about it and you’ll be surprised to see thousands of dollars added to the bill. On the bright side, if you’ve purchased a home in Ontario, British Columbia, or Prince Edward Island, you can claim the land transfer tax rebate.

What is the land transfer tax?

Unless you’re buying a home in Alberta or Saskatchewan (which don’t have a land transfer tax), the land transfer tax is a cost you’ll need to pay after buying any property or land. It’s payable during the closing process and can’t be included in your mortgage. You’ll have to add the LTT to whatever amount you’re expecting to pay so don’t be caught off guard when you’re asked to cough it up all at once.

How is the land transfer tax calculated?

Calculating the total LTT you’ll have to pay can be a multistep process. Consider the purchase price of your home and the province it’s located in. Then, multiply the purchase price by the respective tax rates, which vary based on the province. Sounds complicated? Instead of taking out an old calculator or opening up Excel, you can use RateHub’s land transfer tax calculator, which does the math for you.

What is the land transfer tax rebate?  

If you’re a first-time homebuyer wondering whether or not you’ll have to pay off the entire LTT, there’s a chance you may not! The land transfer tax rebate is one of many first-time homebuyer programs available to qualifying first-time homebuyers in Ontario, British Columbia, and Prince Edward Island. Depending on the cost of your home, the rebate will offset a portion (if not all) of your land transfer taxes payable.

Am I eligible to receive it?   

Whether or not you qualify as a first-time homebuyer varies by province. Here’s a table that shows the requirements and maximum possible rebate by location.

Home location Ontario British Columbia Prince Edward Island
Requirements • You’re least 18 years old

• You’ll occupy the home within nine months of purchase

• You haven’t owned a home anywhere in the world

• Your spouse hasn’t owned a home while married to you

• If it’s a new home, it’s eligible for a home warranty

• Claim must be made within 18 months of purchase

 

 

• You have Canadian citizenship or permanent residency

• You’ve lived in B.C. for at least 12 consecutive months before the property registration’s date or you have filed income tax twice in B.C. over the six years prior to property registration

• You haven’t owned a home before

• The fair market value of your home is less than $475,000

• The land is less than 0.5 hectares in total

• Your purchased home is your primary residence only

• You’re least 18 years old

• You have Canadian citizenship or you are a permanent resident

• You’ve lived in P.E.I. for at least six consecutive months before registering the property or filed two income tax returns in P.E.I. over the past six years

• You haven’t owned a home before

• The purchase price was between $30,000 and $200,000

 

 

 

Maximum rebate $2,000

($3,725 for Toronto’s municipal land transfer tax)

$7,500

(Homes costing between $475,001 and $499,999 will receive a partial rebate)

$2,000

For homebuyers in Canada’s largest city, there’s also the Toronto land transfer tax, which has to be paid on top of the provincial LTT. But first-time buyers can receive a tax rebate of up to $3,725.

How does the land transfer tax rebate work?  

Let’s use Ontario as an example. The land transfer tax rebate offsets all the land transfer taxes on homes valued up to $227,500. In other words, a home valued at $227,500 will be subject to $2,000 in taxes. But if you qualify for the LTT rebate, your net payable taxes will be zero!

What If I’m buying with someone who doesn’t qualify?  

The good news is that you’ll still get a rebate but it’ll be less. For Ontario homebuyers, this results in a $1,000 rebate instead of the $2,000 maximum rebate mentioned above.

Meanwhile, British Columbia’s rules surrounding its property transfer tax (PTT) differs slightly from those in other provinces. If your co-purchaser doesn’t qualify as a first-time home buyer, you’ll only be allowed to claim a percentage of the rebate equal to the percentage of the home you own. For example, if you own a 75% interest in the home (and your spouse or partner owns 25%), you can claim up to 75% of the applicable rebate.

How do I apply?

  • Ontario: For those buying homes in Ontario, make life easier for yourself and remember to file for the rebate within 18 months of purchasing the home. Don’t like paperwork? Your real estate lawyer should be able to help you with this.
  • Toronto: Simply ask your real estate lawyer to help you take care of this online via Teraview when you’re registering the transfer.
  • British Columbia: Ask your real estate lawyer to help you complete the First Time Home Buyers’ Property Transfer Tax Return.
  • Prince Edward Island: After you’ve submitted the First Home Buyers Declaration, you’re done!

The bottom line

Buying a home is expensive and there are a lot of closing costs like the land transfer tax. But you can recover some of your costs by claiming the land transfer tax rebate.

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Flickr: Ian Muttoo