Many homebuyers forget about the biggest closing cost about purchasing a home, which is land
transfer tax. All provinces in Canada levy their own tax, except Alberta and Saskatchewan,
which instead charge a much smaller fee. We've brought in Toronto Real Estate Lawyer Shadi
Nasseri to walk you through the ins and outs of calculating your land transfer tax.
Marginal tax rates for land transfer taxes
vary from province-to-province. However, since the method of calculating land transfer taxes
is similar across the country, we're going to focus on an Ontario example.
In Ontario, there are four possible tax rates.
They range from point five per cent all the way down to two per cent.
Let's say you're purchasing a property
in Hamilton for two hundred and seventy-five thousand dollars. Since the value of your
home falls into the third margin, between two hundred and fifty thousand and four hundred
thousand dollars, we need to do three separate calculations to figure out your land transfer
taxes.
The first calculation is on the first fifty-five thousand dollars of your purchase price. We
take that number and we multiply it by zero point five per cent and we get a total value
of two hundred and seventy-five dollars.
Next, you'll need to calculate the tax for the second margin, the amount between fifty-five
thousand dollars and two hundred and fifty thousand dollars. Since the value of your
home at two hundred seventy-five thousand dollars exceeds this margin, we're going to
use the full range. So, we take the two hundred fifty thousand dollars, we subtract fifty-five
thousand dollars and we get total value of one hundred ninety-five thousand dollars.
We take our one hundred ninety-five thousand dollars and multiply by one per cent, for
a total value of one thousand nine hundred and fifty dollars.
Next, let's calculate the tax for the third
margin. Since our purchase price of two hundred and seventy-five thousand dollars falls between
two hundred and fifty thousand and four hundred thousand dollars, we don't need to use the
full range. Instead, we take two hundred and seventy-five thousand dollars, subtract two
hundred and fifty thousand dollars and get a total of twenty-five thousand dollars. We
take our twenty-five thousand dollars and multiply it by the rate of one point five
per cent for a total of three hundred and seventy-five dollars.
To determine your total land transfer taxes,
we need to add all three figures to get it. So, we take the two hundred and seventy-five
dollars, we add to it the one thousand nine hundred and fifty dollars and again add the
three hundred and seventy-five dollars for a total amount of two thousand six hundred
dollars.
Now, in Ontario, if you're a first-time homebuyer you may qualify for rebates of up to two thousand
dollars. So, in this example, that would bring your land transfer taxes down to just six
hundred dollars.