It’s spring, and the housing market is about to get busy! Many homebuyers focus solely on the listing price of a house and forget all of the hidden fees behind buying a house, including the Ontario land transfer tax.
When you buy land in Ontario, you pay land transfer tax. The tax is a percentage of the purchase price. This tax can be pricy and substantially increase the amount you ‘thought’ you were paying for your house.
For years, the government has been providing a tax break on land transfer tax for first-time home buyers in hopes of making it easier for young families to purchase their first home. As of January 2017, the First-Time Home Buyers Land Transfer Tax Refund was increased from $2,000 to $4,000. This means that no land transfer tax is payable by first-time home buyers on homes up to $368,000 and any home above $368,000 will receive a maximum refund of $4,000.
The catch is that the refund is reduced if one or more of the purchasers is not a first-time home buyer. For example, if a first-time home buyer is purchasing a house with their parent who is not a first-time home buyer and each are acquiring a 50% interest in the home, the child cannot exceed 50% of the refund, now being $2,000.
It can get even more complicated if a first-time home buyer is purchasing a house with their spouse who is not a first-time home buyer. Again, the refund for the first-time home buyer is proportionate to the interest they receive in the home. However, if your spouse owned a home while you were married, or while you were co-habiting for more than 3 years, you forfeit your first-time home buyer’s exemption.
Now, you also cannot just assume that you will qualify for the rebate if you are a first-time home buyer. Among other requirements, you must be at least 18 years old, you must be a Canadian citizen or permanent resident, you must move into the home as your permanent residence within 9 months of taking ownership and you must have never owned a home, or had an interest in a home, anywhere in the world, not just Canada!
The home itself must also qualify as an “eligible home.” The most common eligible home is simply a detached home. However, there are other homes under the definition as well including condominiums and mobile homes.
The first-time home buyer’s exemption is definitely a huge help to first-time home buyers, as long as you meet all the requirements.
Megan Whelan is an associate at the law firm of Cobb & Jones LLP. For more articles, visit the Library page at www.cobbjones.ca.