Purchasing a property in Ontario comes with various costs, including the Ontario Land Transfer Tax. This tax is applied to real estate transactions on a marginal basis, which varies depending on the value of your home.
Many homebuyers are unaware that this tax can add thousands of dollars to the cost of purchasing a home. Thankfully, the Government of Ontario provides a land transfer tax rebate to first-time homebuyers. Understanding this tax and the potential rebate may help you better prepare for the purchase of your home and avoid any surprises.
What Is The Land Transfer Tax (LLT) Rebate?
First-time homebuyers may be eligible for a partial or full refund of the land transfer tax paid at closing. The amount that a homebuyer may receive varies depending on when the conveyance (transfer of ownership) was made.
For conveyances occurring on or after January 1, 2017, qualifying purchasers may receive a maximum rebate of $4000. This fully covers the land transfer tax on homes valued up to $368,000. Homes above this price point may still qualify for the maximum rebate, but the buyer is responsible for any remaining balance.
For conveyances that occur before January 1, 2017, the maximum amount of the refund is $2000.
Who Is Eligible For The Rebate?
Eligibility depends largely on the purchaser being a first-time homebuyer. In order to qualify for the rebate, the purchaser must not have owned or had an interest in a home anywhere in the world, not just in Ontario. Previous ownership of a home may make a purchaser ineligible for the rebate, no matter how you came into possession of the property (purchase, inheritance, gift, etc).
A qualifying purchaser must apply for the refund within 18 months from the date of registration of the conveyance or the date the unregistered disposition occurs. They must also occupy the home as their principal residence within nine months of the closing date. Failing to meet these requirements may affect eligibility for the rebate.
What Is The Total Value of The Rebate?
The total value of the tax refund varies based on the value of the property, as well as the status of the homebuyer(s). In some cases, the available rebate may be reduced where one purchaser is not a first-time homebuyer
For example, when a home is being purchased by a parent (homeowner) and their child (first-time homeowner) with 50/50 interest, the child may only be eligible for a proportionate share of the rebate (typically 50%) based on their ownership interest in the property.
In a situation where a parent is also on title to a child’s property, such as at the insistence of a bank, they will likely pay land transfer tax at the time of registration and apply for a refund from the Ministry of Finance at a later date.
Important Note For Spouses:
In some cases, a purchaser may not be eligible to receive the tax rebate if their spouse owned an interest in a home while being married to the purchaser, even if they did not occupy the property together.
However, an eligible purchaser may still claim a rebate in proportion to their spouse’s interest if their spouse owned a home before becoming the purchaser’s spouse.
In short, eligibility may be affected if a spouse acquired an interest in a home during the marriage. However, ownership before the marriage may be treated differently.
How to apply:
The application process for the rebate may vary depending on how the property was registered and whether there are multiple purchasers involved. As eligibility requirements and deadlines differ, buyers should take care to review the criteria or seek legal guidance before applying.