What is Land Transfer Tax?

When it comes to a home purchase, many buyers get caught on the listing price, and forget about the additional expenses that come up in the transaction, such as closing costs and land transfer tax. So, what is land transfer tax, and how much is it anyway? In this article, we summarize everything you need to know.

Understanding Land Transfer Tax

A land transfer tax (LTT) is a tax that is levied by the government when ownership of a property is transferred from one owner to another. This tax is typically paid by the buyer of the property and is based on the property’s purchase price. The LTT is usually calculated as a percentage of the purchase price, and the rate can vary depending on the property’s location and the local government’s policies.

In Canada, land transfer taxes are levied by provincial and territorial governments, and the rules and regulations regarding LTTs can vary by location. In addition to the provincial and territorial LTTs, some municipalities may also levy their land transfer taxes. The city of Toronto is one such municipality with its own land transfer tax.

The purpose of a land transfer tax is to generate revenue for the government, which can then be used to fund essential public services, such as healthcare, education, and infrastructure. The LTT may sometimes support specific programs or initiatives, such as affordable housing or environmental projects.

Who Pays the Land Transfer Tax?

The property buyer typically pays the land transfer tax when the ownership is transferred from the seller to the buyer. The amount of LTT is usually based on the property’s purchase price and is calculated as a percentage of that price. The exact rate can vary depending on the property’s location and the local government’s policies.

In rare cases, the seller may agree to pay a portion or all of the LTT as part of the negotiation process with the buyer. However, this is not the norm, and paying the LTT usually falls on the buyer.

Homebuyers need to factor in the cost of the LTT when considering the overall cost of purchasing a property. In some cases, the LTT can be a significant expense, particularly for properties in areas with high property values.

Land Transfer Tax Rates

The land transfer tax rates in Canada vary by province and territory, and in some cases, by municipality. Here are the current land transfer tax rates for each province and territory:

Alberta – There is no provincial LTT in Alberta.

British Columbia – The LTT in British Columbia is calculated as follows:

• 1% on the first $200,000 of the purchase price
• 2% on the portion of the purchase price between $200,000 and $2 million
• 3% on the portion of the purchase price over $2 million

Manitoba – The LTT in Manitoba is calculated as follows:

• 5% on the first $30,000 of the purchase price
• 1% on the portion of the purchase price between $30,000 and $90,000
• 5% on the portion of the purchase price between $90,000 and $150,000
• 2% on the portion of the purchase price over $150,000

New Brunswick – The LTT in New Brunswick is calculated as follows:

• 1% on the first $25,000 of the purchase price
• 5% on the portion of the purchase price between $25,000 and $50,000
• 1% on the portion of the purchase price between $50,000 and $100,000
• 5% on the portion of the purchase price between $100,000 and $150,000
• 2% on the portion of the purchase price over $150,000

Newfoundland and Labrador – The LTT in Newfoundland and Labrador is calculated as follows:

• 4% on the first $500,000 of the purchase price
• 5% on the portion of the purchase price between $500,000 and $1 million
• 6% on the portion of the purchase price over $1 million

Northwest Territories – The LTT in the Northwest Territories is calculated as follows:

• 1% on the first $5,000 of the purchase price
• 2% on the portion of the purchase price between $5,000 and $500,000
• 3% on the portion of the purchase price over $500,000

Nova Scotia – The LTT in Nova Scotia is 1.5% of the purchase price.

Nunavut – The LTT in Nunavut is calculated as follows:

• 1% on the first $55,000 of the purchase price
• 2% on the portion of the purchase price between $55,000 and $250,000
• 3% on the portion of the purchase price over $250,000

Ontario – The LTT in Ontario is calculated as follows:

• 5% on the first $55,000 of the purchase price
• 1% on the portion of the purchase price between $55,000 and $250,000
• 5% on the portion of the purchase price between $250,000 and $400,000
• 2% on the portion of the purchase price over $400,000
• 5% for amounts exceeding $2,000,000 where the land contains one or two single-family residences

Prince Edward Island – The LTT in Prince Edward Island is calculated as follows:

• 1% on the first $30,000 of the purchase price
• 2% on the portion of the purchase price between $30,000 and $200,000
• 3% on the portion of the purchase price over $200,000

Quebec – The LTT rates in Quebec are as follows:

• 5% on the first $50,000 of the purchase price
• 1% on the portion of the purchase price between $50,000 and $250,000
• 5% on the portion of the purchase price between $250,000 and $500,000
• 2% on the portion of the purchase price over $500,000

Do I Pay Land Transfer Tax as a First-Time Homebuyer?

You must still pay the LTT as a first-time buyer. However, some provinces and territories offer land transfer tax rebates or exemptions for first-time homebuyers. The eligibility criteria, the amount of the rebate, and the exemption rules vary by location. You can find out what rebates you are eligible for on your provincial government website.

While the LTT can be a significant expense for homebuyers, it is essential to consider it when budgeting for the overall purchase cost. Research the specific LTT policies in your location and consult a RE/MAX agent and an accountant who can show you how to navigate your tax obligations and apply for rebates where applicable.

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Originally published on the RE/MAX Canada Blog.