The process of purchasing real estate can be an expensive endeavor. Whether you are buying your first home, your dream home, or an investment property, the costs associated are at the forefront of every buyer’s mind. The purchase price, legal fees, and any realtor costs are often the most obvious expenses that buyer’s take into consideration when looking to purchase real estate. There is an additional cost, however, that is often forgotten and is in almost every case required to be paid before a real estate transfer can be completed. I am of course talking about Land Transfer Tax or LTT for short. But what is Land Transfer Tax? Who pays it? And how is it calculated?
What is the Ontario Land Transfer Tax?
The Ontario Land Transfer Tax is a provincial tax levied on the transfer of land or an interest in land within the province. Provincial LTT applies to all types of properties, including residential, commercial, and industrial, and its rate varies based on the purchase price of the property. In some cases when there is no purchase price, land transfer tax is based on the fair market value of the land, including for example:
- the transfer of a lease with a remaining term that can exceed 50 years
- the transfer of land from a corporation to one of its shareholders, or
- the transfer of land to a corporation, if shares of the corporation are issued
Who Pays the Ontario Land Transfer Tax?
The buyer is responsible for paying Ontario LTT. The amount is often collected by the purchaser’s lawyer and paid to the Ministry of Finance for the Province of Ontario on closing. LTT is a one-time payment that applies to each transfer of real property, and therefore a buyer will only need to pay the tax once on the closing of the transaction. There is currently no option to pay LTT in monthly or other installments to the Minister of Finance.. It’s important for buyers to budget for this expense in addition to their down payment and other closing costs associated with purchasing property.
Land transfer tax is payable on every conveyance of land tendered for registration and every unregistered disposition of a beneficial interest in land, unless specifically exempt under the Act or regulations. Some of these exemptions include:
- certain transfers between spouses
- certain transfers from an individual to his or her family business corporation
- certain transfers of farmed land between family members
- certain transfers of a life lease from a non-profit organization or a charity
How is the Ontario Land Transfer Tax Calculated?
The calculation of the Ontario LTT is based on a sliding scale, in which the tax rate increases with the purchase price of the property.. As of 2025, the rate structure is as follows:
- 0.5% on the first $55,000
- 1.0% on the amount exceeding $55,000 up to and including $250,000
- 1.5% on the amount exceeding $250,000 up to and including $400,000
- 2.0% on the amount exceeding $400,000 up to and including $2,000,000
- 2.5% on amounts exceeding $2,000,000
For example, if you purchase a property for $600,000, the calculation would be:
- 0.5% on the first $55,000 = $275
- 1.0% on the next $195,000 ($250,000 – $55,000) = $1,950
- 1.5% on the next $150,000 ($400,000 – $250,000) = $2,250
- 2.0% on the remaining $200,000 ($600,000 – $400,000) = $4,000
Total LTT = $8,475
First-Time Homebuyers
With the price of homes in Ontario increasing exponentially over the last few years, Land Transfer Tax has become a significant barrier for first time home buyers. Thankfully, first-time homebuyers may be eligible for a LTT rebate of up to a maximum of $4,000.00. A buyer’s total LTT payable (less the LTT rebate) will be adjusted by the buyer’s lawyer and collected with the closing costs of their transaction. To claim the rebate, a buyer must meet the following criteria:
- must be at least 18 years of age
- cannot have owned a home or an interest in a home anywhere in the world
- their spouse (as defined by section 29 of the Family Law Act, R.S.O. 1990) cannot have owned a home or interest in a home, anywhere in the world while they were the buyer’s spouse
The rebate will be reduced if one (or more) of the title owners/holders is not a first-time homebuyer. The refund will be proportionate to the interest acquired by the individuals who qualify for the refund. If a buyer’s spouse is not a first-time homebuyer, so long as they did not own the home while they were spouses, the buyer may still eligible to claim the maximum rebate amount applicable.
Closing Remarks
When preparing your budget for a real estate purchase don’t forget the land transfer tax. LTT can be a significant additional cost and should be taken into consideration when looking to buy real property in Ontario. Seeking assistance from a legal professional will help ensure that the process is done correctly, that any exemptions or refunds are taken advantage of, and that no surprise costs will arise during an already stressful time.