How Land Transfer Tax Works in Ontario
How Land Transfer Tax Works in Ontario
Buying a home in Ontario comes with more than just a down payment and closing fees — one of the biggest costs buyers face is the Land Transfer Tax (LTT). Whether you're a first-time buyer trying to budget or a seasoned investor looking to understand your costs, knowing how LTT works is essential.
Ontario's land transfer tax system is straightforward once you understand the tiers, rebates, and special rules. Here’s a complete guide to how it’s calculated and what buyers can expect on closing day.
What Is Land Transfer Tax (LTT)?
Land Transfer Tax is a provincial tax paid by the buyer when real estate changes ownership.
It applies to:
Freehold homes
Condos
Vacant land
Commercial properties
The tax is due on closing, paid through your real estate lawyer.
How Land Transfer Tax Is Calculated in Ontario
Ontario uses a tiered (marginal) tax system, similar to income tax brackets.
Ontario LTT Rates (2025)
0.5% on the first $55,000
1.0% on $55,000.01 – $250,000
1.5% on $250,000.01 – $400,000
2.0% on $400,000.01 – $2,000,000
2.5% on amounts over $2,000,000 (for one- or two-family residential properties)
Example: Home Purchase Price = $800,000
Calculation:
0.5% of $55,000 = $275
1.0% of next $195,000 = $1,950
1.5% of next $150,000 = $2,250
2.0% of next $400,000 = $8,000
Total LTT = $12,475
Toronto Has a Second Land Transfer Tax
If you're buying in Toronto, you pay two taxes:
Ontario LTT
Toronto Municipal Land Transfer Tax (MLTT)
Toronto’s rates mirror the province’s, doubling the total for Toronto buyers.
Toronto LTT Example for an $800,000 home:
Provincial LTT: $12,475
Municipal LTT: $12,475
Total: $24,950 in land transfer tax
This is one of the reasons many first-time buyers look to cities outside Toronto.
First-Time Home Buyer Rebate
Ontario offers a generous rebate to help first-time buyers reduce their closing costs.
Ontario Rebate: up to $4,000
Covers most or all of the tax on homes up to ~$368,000.
Toronto Rebate: up to $4,475
If buying in Toronto, first-time buyers may receive both rebates.
Eligibility Requirements
Must be a Canadian citizen or permanent resident
Must never have owned a home anywhere in the world
Spouse cannot have owned a home while married
Who Is Exempt From Land Transfer Tax?
Certain buyers may receive full or partial exemptions:
Spousal transfers
Transfers due to separation
Certain family transfers of agricultural land
Transfers involving corporate reorganizations
Your lawyer will confirm if any exemptions apply.
When You Pay Land Transfer Tax
LTT is paid on closing day, along with:
Legal fees
Title insurance
Adjustments
Insurance setup fees
Your lawyer collects and remits the tax to the province (and the city, if applicable).
How to Reduce Your Land Transfer Tax
While you can’t avoid the tax entirely, you can reduce or manage it:
✔ Buy in cities outside Toronto to avoid municipal LTT
✔ Use first-time buyer rebates
✔ Buy new construction that may offer incentives
✔ Consider joint ownership to share costs
Why Land Transfer Tax Matters for Buyers
LTT is one of the largest upfront costs in real estate.
Understanding it helps buyers:
Budget properly
Avoid surprises at the lawyer’s office
Choose between different cities
Plan down payment strategy
Evaluate whether to buy now or later
Final Thoughts
Land Transfer Tax is an unavoidable part of buying real estate in Ontario, but it doesn’t have to be confusing. By understanding the provincial rules, Toronto’s additional tax, and available rebates, buyers can plan their finances properly and make smarter decisions.
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