The Land Transfer Tax Rebate for First Time Home Buyers in Ontario – Do You Get It?
By Jan Jaluvka
The Land Transfer Tax Rebate for First Time Home Buyers in Ontario is one of the few significant tax breaks available to individual people in Ontario today. If you are purchasing a home in Ontario and you’re doing so for the first time it’s important to determine if you qualify for this rebate and learn how to go about claiming it.
But first let’s examine how Land Transfer Tax in Ontario is normally calculated. Land Transfer Tax (L.T.T.) is a tax levied by The Province of Ontario on purchasers of real estate in the province at the time of registration of the deed/transfer of ownership of the property to them. Simply stated, the amount of tax payable increases according to the purchase price paid.
The amount of L.T.T. payable on a property purchase with a purchase price of $250,000 or less is normally calculated as follows:>
0.50 % of the purchase price up to $55,000;
1.00 % of that portion of purchase price between $55,000 up to $250,000.
(Increased L.T.T. rates apply beyond $250,000.)
Using an example of a home with a purchase price of $225.000, a purchaser would be required to pay L.T.T. in the amount of $1,975.00 to the Government of Ontario at the time of closing of the transaction. This adds a considerable financial burden to a purchaser already faced with a whole range of expenses associated with the transaction and the move itself.
However, in the situation above, a first time home buyer who qualifies for the land transfer tax rebate would not have to pay any tax whatsoever and would therefore be able to save the full $1,975.00 otherwise payable.That’s why it’s important to determine if you can qualify for the first time home buyers rebate of land transfer tax.
Our experience as real estate lawyers has shown that, in the great majority of cases, qualifying for this rebate can save first time buyers well over 50% of the total legal costs of the purchase transaction.
So let’s see how The Land Transfer Tax Rebate for First Time Home Buyers in Ontario works and if you can qualify.
The maximum amount of the L.T.T. rebate is $2,000.00. Accordingly, if your purchase price is greater than $227,500.00, you would pay L.T.T. at the applicable rate(s) on the excess. The rebate is usually calculated and claimed on closing when the deed/transfer of the property is registered in your name. Occasionally, where the L.T.T. is paid and the rebate is not claimed upon registration, the rebate may be claimed by making written application to the Ontario Ministry of Revenue within 18 months after closing.
The rebate applies to the purchase all both resale and newly-constructed homes.
In order to be eligible for the first time home buyers rebate you must meet all of the following requirements:
1. You must be over 18 years of age;
2. You must take up occupancy of the home you are purchasing as your principal residence within 9 months of the date of closing when the deed/transfer of the property is registered in your name(s);
3. You must not have owned a home or owned an interest in a home, anywhere in the world; and
4. If you are a spouse, your spouse must not have owned a home or owned an interest in a home, anywhere in the world while being your spouse.
Here is some clarification of the above requirements:
If you are a spouse and your spouse has owned a home or an interest in a home while being your spouse, neither you nor your spouse qualifies for the rebate. However, if your spouse had owned a home or an interest in a home and sold or otherwise disposed of it prior to becoming your spouse, even though your spouse would not qualify for the rebate (because he/she has previously been a homeowner), you, as purchaser, would qualify for the rebate up to its maximum amount.
The fact that you or your spouse may not have previously purchased a home or an interest in one but rather acquired it by way of a gift or inheritance is not relevant to qualifying for the rebate. Prior ownership by any means is the critical factor which applies to determine eligibility
Banks and other lending institutions often require a parent to go on the title of a home together with their child to enable the child to secure mortgage financing for the home purchase. Where the child qualifies for the rebate and the parent does not acquire a beneficial ownership interest in the home, but rather goes on title merely as a trustee for the child, the child would be eligible for the full amount of the rebate provided adequate supporting legal documentation validly confirming such trust arrangement is submitted to the Ontario Ministry of Revenue. In this situation it would be necessary to pay the full amount of L.T.T. otherwise due on closing and to subsequently submit an application to the Ministry for a refund of the L.T.T. paid together with the above required documentation.
The foregoing discussion of the Ontario Land Transfer Tax Rebate for first time home buyers is intended to provide a general overview of how the program works and to assist in determining a person’s potential eligibility to receive the rebate. It is by no means meant to be exhaustive in its scope, coverage or analysis of the subject.
If you are considering buying a home you should obtain proper legal advice from a knowledgeable, experienced real estate lawyer.
For other legal articles dealing with real estate please see the following: Buying a Home in Ontario, Why Use Title Insurance When Buying a Home? and Selling Your Home in Ontario
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