Land Transfer Tax (don’t forget it)

The Land Transfer Tax is one of those interesting pains in the arse (in Ontario) that bites you when you are thinking about buying a house or property. I was very lucky that when I bought my first house, I didn’t have to pay the land transfer tax, because I had used a Ontario Home Owner Savings Plan (long since gone), which had this as its major bonus (for 1st home buyers only) not having to pay the Land Transfer Tax. This forgiving of the Land Transfer Tax on first homes has been replaced by the  Land Transfer Tax Refund for First-time Homebuyers (please read that carefully).

Unfortunately the second house I bought I had to fork out my land transfer tax, and I grumbled a great deal about it. This cost is one of those forgotten costs that is rarely spoken of, until closing costs are discussed (the danger is you might buy less house if you thought about it as part of your purchasing price), but you should think about it before you make an offer on a house.

Land Transfer Tax Calculation

Financial Calculator

You could try to calculate your Land Transfer Tax with a Calculator

From an Ontario Government page, the tax is calculated in the following way:

The tax rates on the value of the consideration are as follows:

Amounts up to and including $55,000 -0.5 %

Amounts exceeding $55,000 up to and including $250,000 - 1.0 %

Amounts exceeding $250,000 - 1.5 %

Amounts exceeding $400,000 where the land contains one or two single family residences – 2.0 %

For the definition of “single family residence,” as defined in subsection 1(1) of the Act please see the end of this bulletin or the Act.

On the basis of that simple formula for residential properties, you could put this in your Excel-like spreadsheet and get the right answer (based on the calculation proposed on the government web page):

=IF(B4<=55000,(B4*0.005),IF(B4<=250000,((B4*0.01)-275),IF(B4<=400000,((B4*0.015)-1525),((B4*0.02)-3525 ))))

Where the B4 cell holds the actual selling price of the residential property. An example output might be:

Price $500,000.00
Land Xfer Tax $6,475.00

Easy enough to figure out, but don’t forget it is there! If you are buying a  $1/2 Million dollar house $6475 may seem like chump change, and if you think so, please stroke me a cheque for that amount, and see how it feels then.


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