# The Hidden Cost of Land Transfer Taxes

TL:DR So I accidentally hit the wrong button and republished this. I wrote it about 10 years ago, but it is still true. Land Transfer taxes are an expense many folks forget about, don’t.

The Land Transfer Tax is one of those interesting pains in the rear in parts of Ontario.

It bites you when you are thinking about buying a house or property. Luckily when I bought my first house, I didn’t have to pay the land transfer tax. I used an Ontario Home Owner Savings Plan (along since gone program). The main feature (for 1st home buyers only) was 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 This forgiving of the Land Transfer Tax on first homes has been replaced by the  Land Transfer Tax Refund for First-time Homebuyers (please read that carefully).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 mentioned, 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

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:

Prices up to and including \$55,000 -0.5 %

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

Prices 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:

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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