I am Buying a Home for the First Time: Do I Have to Pay Land Transfer Tax ?

 In Real Estate Law

In Ontario, Land Transfer Tax is payable to the Provincial Government when you buy land or a home, or an interest in land or a home. This Land Transfer Tax is calculated based on the purchase price and must be paid on the closing date.

If you are buying or acquiring an interest in a home for the very first time, you may be eligible for a rebate of up to a maximum of $4,000.00 on the Land Transfer Tax. If you qualify for the rebate, no Land Transfer Tax is payable if your purchase price is under $368,300.00. If your purchase price is over this amount, you will have to pay the difference of the Land Transfer Tax, after applying the rebate. For example, if your Land Transfer Tax is $7,000.00 and you qualify for the maximum amount of the rebate, you would have to pay Land Transfer Tax of $3,000.00 on the closing date.

Generally, to qualify for the first time home buyer rebate, you must meet the following requirements:

  1. You must be at least 18 years old;
  2. You must be a Canadian Citizen or a permanent resident of Canada;
  3. You must live in the home as your principal residence within nine months of the closing date. In other words, if you are buying your first home as an investment property and plan on renting out the home, you do not qualify for the rebate;
  4. You cannot have ever owned an eligible home or an interest in an eligible home, anywhere in the world, at any time. If you have owned an eligible home or had an interest in a eligible home in a country, other than Canada, you do not qualify for the rebate; and
  5. If you have a spouse, your spouse cannot have owned an eligible home, or had any ownership interest in an eligible home, anywhere in the world, during the time he or she was your spouse.

For the purposes of the Land Transfer Tax, not only are you a considered a “spouse” if you are married, but you are considered a spouse if you are not married and (i) have cohabitated continuously for three (3) years or (ii) are in a relationship of some permanence with a person with whom you have a child with.

What if I am purchasing a home with someone else?

Your eligibility for the rebate will vary depending on the circumstances surrounding your ownership and whom you are purchasing with.

If you are purchasing a home with your spouse, the eligibility is all or nothing. If your spouse has previously owned a home, but not while you were spouses of each other, you can claim the rebate for your interest and your spouse’s interest (up to a maximum amount of $4,000.00). If your spouse has owned a home while you were spouses of each other, you do not qualify for the rebate.

If you are purchasing a home with someone other than your spouse, the rebate will be reduced if the other buyer is not a first time home buyer, in proportion to your percentage of ownership. For example, if you purchase a home with a parent, as to 50% interest for you and 50% interest for brother, however your parent has previously owned a home before, you can only claim 50% of the rebate. In other words, you can only claim a rebate of $2,000.00, rather than the full $4,000.00 rebate.

Hire a lawyer!

Purchasing a home for the first time can be an exciting and nerve-racking experience. You are likely to have many questions as to how the process works and most of all, the closing costs that you should expect to incur for your purchase transaction. If you are buying a home, speak to a real estate lawyer as early as possible.  An experienced real estate lawyer will help navigate you through this process and inform you as to what to expect in terms of closing costs.

This blog post was written by Stephanie Simard, a member of the Real Estate and Family Law teams.  She can be reached at 613-369-0385 or at stephanie.simard@mannlawyers.com.

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