What is the New City of Toronto Land Transfer Tax? On October 22, 2007 Toronto City Council approved a new Toronto Land Transfer Tax impacting residential and commercial real estate transaction in the City of Toronto. This tax is in addition to the existing Ontario Land Transfer Tax. In certain cases, this may double the land transfer taxes payable by the property buyer at closing. See the table below for the calculation to determine the Toronto Land Transfer Tax for residential and commercial properties. Residential | Commercial | - 0.5% on first $55,000
- Plus 1% on next $345,000
- Plus 2% on amount over $400,000
| - 0.5% on first $55,000
- Plus 1% on next $345,000
- Plus 1.5% on amount over $400,000 and less than $40M
- Plus 1% on amount over $40M
| Example: Residential Property Sold For $675,000 1. 0.5% x $55,000 = $275 2. 1% x $345,000 = $3,450 3. 2% x $275,000 = $5,500 Toronto Land Transfer Tax Due: $9,225 | Example: Commercial Property Sold for $1.4M 1. 0.5% x $55,000 = $275 2. 1% x $345,000 = $3,450 3. 1.5% x $1,000,000 = $15,000 Toronto Land Transfer Tax Due: $18,725 |
When does the new Toronto Land Transfer Tax take effect? February 1, 2008, with three exemptions. What are the three exemptions? 1. If you are a first-time homebuyer, you will receive a rebate for Toronto Land Transfer Tax payable on the first $400,000 of the purchase price of your home. If the purchase price of your home is more than $400,000 you will have to pay Toronto Land Transfer Tax on the amount over $400,000. If you pay $400,000 or less for your home, you will receive a rebate for Toronto Land Transfer Tax paid. Remember this is for first-time homebuyers only, and you may be required to sign an affidavit certifying you are indeed a first-time buyer. 2. If you enter into an Agreement of Purchase and Sale before December 31, 2007 with a closing date (normally the date you take possession of the property) after February 1, 2008, you will pay the Toronto Land Transfer Tax at closing but be rebated the full amount. 3. If you enter into an Agreement of Purchase and Sale after December 31, 2007 and have a closing date before February 1, 2008, you will not be required to pay the Toronto Land Transfer Tax. Under any other date scenario, Toronto Land Transfer Tax will be payable. In what geographic area does this new Toronto Land Transfer Tax apply? Toronto Land Transfer Tax applies only to the purchase and sale of property within the City of Toronto . What are the home seller's implications of this Toronto Land Transfer Tax? As a homeowner thinking about selling, there are significant implications you should be aware of. To understand those implications let's look at what will motivate buyers, i.e. avoiding paying the Toronto Land Transfer Tax. Buyers will be looking to enter into Agreements of Purchase and Sale before December 31, 2007 to avoid paying the Toronto Land Transfer Tax. If buyers are unable to enter into Agreements of Purchase and Sale prior to December 31, 2007, they will be looking to close prior to February 1, 2008, again in time to avoid paying the Toronto Land Transfer Tax. So the implication to you as a homeowner looking to sell is that you should move quickly to get your home on the market now, and exposed with a proper marketing campaign so it can be sold for the maximum price to meet these key dates. If you wait and sell after these dates pass, I expect many buyers will be able to successfully negotiate a reduced price in order to compensate them for the additional Toronto Land Transfer Tax. In effect, at that time home sellers will be ‘paying the tax' through a reduced selling price. Since all Toronto home sellers will be faced with this fact, property values (and therefore prices) may drop by approximately 2% to account for this increased tax. The time to act is now by contacting your Realtor® if you are thinking about selling your Toronto home. A second implication for home sellers is you need to be ready for buyers looking for a quick-close in January 2008. If an Agreement of Purchase and Sale is not signed by December 31, 2007, many buyers will be trying to still have the closing date occur prior to February 1, 2008, again to avoid paying the Toronto Land Transfer Tax. Remaining flexible will be key to closing a transaction that maximizes the price you receive for your home. What are the home buyer's implications of this Toronto Land Transfer Tax? As a buyer, it is clear that after February 1, 2008 you will have to pay the Toronto Land Transfer Tax at closing. The key is to look for a suitable property and try to either have an Agreement of Purchase or Sale in place before December 31, 2007, or the transaction closed prior to February 1, 2008. Act now in engaging a Realtor® to help you find a suitable property. To find out more information on the Toronto Land Transfer Tax or have a personal explination, please complete the form below: | 
