Many people don't consider the considerable expense of land transfer tax when purchasing a home. After the deal is completed, you are required to pay a tax to the government when you purchase a property (and the land it is built upon). The amount paid is determined by the property's value.
The cost of the Land Transfer Tax will be the same throughout Ontario, with the exception of Toronto and the areas in and around it, such as North York, Etobicoke, and Scarborough.
Keep reading to find details on the transfer tax in Mississauga, as well as information on other particulars such as how to pay the transfer tax in Mississauga.
Ontario Land Transfer Tax
The provincial Ontario land transfer tax was first introduced to Ontario in 1974 by the Conservative Ontario Government, with a starting percentage of 0.3% for up to $35,000 of the purchase price of real estate and 0.6% for the remainder.
Home buyers in Toronto began paying a municipal transfer tax in addition to the provincial one in 2008, while the Greater Golden Horseshoe Region started collecting a non-resident speculation tax in 2017.
The rates of the transfer tax in Ontario were last revised in 2017. In Ontario, the rates of tax are rarely altered. The last time the relevant tax rates in Ontario were revised was in 2017, which marked the first revision since 1997.
Does Mississauga Have a Land Transfer Tax?
Toronto is the only Ontario municipality that has a municipal land transfer tax. Neighboring cities like Mississauga, Brampton, Vaughan, and Markham do not charge equivalent municipal taxes; they simply pay provincial taxes.
In other words, Mississauga does have a land transfer tax, since it is subject to provincial taxes. Just because Mississauga does not have a municipal land transfer tax does not mean you will not be subject to the provincial property transfer tax.
How Is the Tax Calculated in Ontario?
If a purchase and sale agreement is signed after November 14, 2016, and if registration or disposition takes place on or after January 1, 2017, the following tax rates will apply to the value of the consideration:
- 0.5% for amounts up to $55,000
- 1.0% for amounts over $55,000 up to $250,000
- 1.5% for amounts over $250,000 up to $400,000
- 2.0% for amounts over $400,000
- 2.5% for amounts over $2,000,000, as long as land contains up to two single-family dwellings
Toronto Land Transfer Tax
Canada's highest Land Transfer Tax rates are currently found in Toronto. They now cost an average of $20,000 and have increased in purchase price seven times faster than house prices since 1974.
Buyers of homes in Toronto inside the boundaries of Etobicoke, Steeles Avenue, Scarborough, and Lake Ontario must also pay a municipal tax that is equal to the rates charged in Ontario in addition to the provincial tax.
First-time homeowners in Toronto are eligible for a rebate of up to $4,475 to cover the additional cost.
Who Is Exempt From Paying Land Transfer Tax in Ontario?
A provincial rebate allows buyers to claim as much as $4,475 from their property transfer taxes. For homes as low as $370,000, first-time homebuyers may avoid the property transfer fee for their first home.
That being said, the reimbursement does not constitute a full tax exemption. It is still important that you pay all required taxes when purchasing real estate, and honestly report all information when applying for reimbursement.
First-time home buyers in Ontario Land Transfer Tax Refund
Land transfer taxes are an additional burden on homebuyers, especially for first-time homebuyers in Ontario. Accordingly, the government is increasing the refunds for buyers who bought new homes for the first time last year.
Refunds can be issued for purchases that took effect before the 2017 period to the extent that the refund exceeds $2000. After 2017, buyers will not be taxed on the first $368k purchase price and can receive $4,000 on their remaining purchase price.
To be considered a first-time home buyer in Ontario you must meet a few criteria:
- You should be 18 years of age or older.
- You should be a Canadian citizen or a permanent resident.
- The property you purchase must be your primary residence.
- You must not have purchased a home anywhere in the world previously.
- Your spouse or common-law partner must also have never purchased a home anywhere previously.
A spouse would be a person whom you have lived with for at least three years without being married, with whom you have a common-law relationship, or with whom you have a child together. The refund must be requested within 18 months of the property's purchase.
Even if one or more of the buyers are not first-time homebuyers, you are still eligible for the tax refund. However, your eligibility will result in a partial reduction in the amount you can get back. If there are two buyers, one of whom is a first-time homeowner, for instance, the first-time homebuyer is only entitled to 50% of the land transfer tax refund.
How to Apply for the Ontario First-Time Home Buyer Land Transfer Tax Rebate
When your property is registered, you have the option of claiming the first-time homebuyer rebate or waiting until a later time. If you want to request a refund during registration, your real estate attorney can do it electronically if they are using Ontario's electronic land registration system to register your property.
You can request your refund at a land registry office if your property is being registered using paper forms by bringing the necessary paperwork:
- Affidavit for the Ontario Land Transfer Tax Rebate for First-Time Home Buyers
- Affidavit of Transfer or Deed for the Ontario Land Transfer Tax
How to Pay Land Transfer Tax
Land transfer tax is paid through your attorney at closing. The land transfer tax due in Ontario, less any rebates and exemptions, will be determined if your lawyer elects to electronically register your property. Additionally, you can register your property in person at a land registry office.
You can request a reimbursement from the Ministry of Finance if you accidentally overpaid your land transfer tax, say you now qualify for a rebate or exemption. Prior to your property being registered, you can also pay land transfer tax ahead of time.
Land Transfer Tax Currency
The only acceptable currency is Canadian dollars. The value of the consideration in Canadian dollars must be stated in the land transfer tax statements. The day of the currency exchange should be the date on which the purchase and sale agreement is accepted and formally entered into or the date of registration in the absence of a written agreement.
Non-resident Speculation Tax in Ontario
In the budget 2020, Canada announced that it would be imposing a ban on foreign homebuyers. The prohibition is expected to last two years and may continue as long as the property purchase price needs to be kept down in Canada.
Foreign buyers cannot buy a residential property in Canada until at least 2024. However, refugees, international students and people not currently on work permits can still make purchases.
The announcement replaces provincial speculative taxes on foreigners. The agency expects it to remain in place until federal prohibition is lifted.
Electronic Registration on or After January 1, 2017
Beginning January 1, 2017, a new tax bracket and tax rate applies to all electronically registered buyers. Any taxpayer claiming land transfer tax overpayment may claim reimbursement. Transferees may also pre-pay transfer taxes from the Minister for Finance. Interested parties can send documents to the finance ministry to apply for reimbursement.
Do You Pay Double Land Transfer Tax in Toronto?
Toronto is the only province of Ontario that has municipal property transfer taxes. Neighboring municipalities including Mississauga, Brampton, Vaughan, and Markham do not have equivalent municipal land transfer taxes. In Toronto, a home will cost double the property transfer tax compared to the home you bought in the area.
Ontario Land Transfer Tax Calculator
There is a land transfer tax calculator available online to help you in calculating the land transfer tax you can expect to pay when buying land in Ontario. It's important to keep in mind that while Mississauga does not have a municipal tax, it is subject to provincial land transfer tax requirements.
Things to Look Out For When Transferring Land in Ontario
One thing you should be aware of is that, unlike surrounding areas, Toronto has a municipal tax in addition to the provincial tax. This means that a home buyer can expect to pay up to twice as much for land transfer taxes when buying in Toronto.
Making sure to pay attention to all the associated costs is essential to successfully navigating real estate deals in Toronto. If you do not account for all the taxes and other things you can expect to pay, you may find that your financial situation becomes more than you can handle.