If you are planning on buying your first home in the near future, you will be happy to hear that yesterday, the Ontario government announced they will be doubling their land transfer tax refund for first time homebuyers from $2,000 to $4,000. Now I know this isn’t a ‘make-it-or-break-it’ deal for most of you, but it is a welcomed change! The other announcement, was an increase in land transfer taxes for properties sold over $2M. Both these changes will come into effect on January 1st, 2017. Read on as we explore together.
Land Transfer Tax
Whenever you purchase a home in Ontario, the Ontario government charges a ‘Land Transfer Tax’. This tax is calculated on a graduated rate based on the purchase price. (0.5% for the first $55,000, 1% for the next 195,000, etc…)
Sidenote: For those of you who are planning to buy a home in Toronto, keep in mind that the city of Toronto has its own Municipal Land Transfer Tax IN ADDITION to the Ontario one (lucky us…)
First Time Homebuyer’s Land Transfer Tax Refund
If you are a first time homebuyer, you may qualify for a refund on your land transfer tax. The new Ontario land transfer tax refund (effective Jan 1, 2017) maxes out at $4,000 and for Toronto homebuyers there is a maximum refund of $3,725 (no changes here.)
This means first time homebuyers can now purchase a property up to $368,000 and receive a full refund to the Ontario land transfer tax ($350,000 for Toronto purchases)
How do you apply? Typically, if you qualify for this refund, your lawyer will apply for it on your behalf to directly offset your land transfer taxes, so that you are never out of pocket. However, if this doesn’t happen, you still have up to 18 months to claim after your closing (registration) date.
While this change may not seem like a big difference compared to the total purchase price of a home, it’s $2,000 less that a first time homebuyer needs to come up with out of pocket. A welcome change indeed, and a step in the right direction to helping new homebuyers enter our competitive market.
Stay tuned for our next article where we continue the topic for first time homebuyers: “What costs to expect when buying a home?” And the various incentives available. Be sure to subscribe to our newsletter so you don’t miss a beat!