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Land transfer tax rates to rise for some Toronto buyers in January

Higher costs are on the way for some Toronto home buyers in the new year; following its approval on September 6th, the City of Toronto’s new graduated Municipal Land Transfer Tax (MLTT) Rate will officially be in effect as of January 1, 2024.

The new MLTT will impact residential properties valued at $3 million and above (with at a maximum of two single-family residences), with a new levy that starts at 3.5% of the home’s value.

The new graduated threshold for MLTT is as follows:

Graduated Municipal Land Transfer Tax rates 

Value of Consideration

Rate

Over $3,000,000 and up to $4,000,000

3.5%

Over $4,000,000 and up to $5,000,000

4.5%

Over $5,000,000 and up to $10,000,000

5.5%

Over $10,000,000 and up to $20,000,000

6.5%

Over $20,000,000

7.5%

New tax measure unlikely to have much of an impact

Overall, the new levy isn’t likely to greatly discourage high-end home buyers, says James Laird, Co-CEO of Ratehub.ca and President of CanWise mortgage lender.

“The incoming Toronto land transfer tax (LTT) increase will likely not have much of an impact on luxury real estate," he says.

“On a $10 million house under the current Toronto LTT, the home buyer would pay $236,475. Under the new Toronto LTT (effective January 1, 2024), the homebuyer would pay $416,475. This is a difference of $180,000 (1.8% of the purchase price), which is likely not enough to dissuade a luxury home buyer from purchasing."

As well, the majority of residential properties in Toronto fall below the threshold, exempting them from the higher tax rate; the average price of a detached house was $1,617,918 in November in the city, according to the Toronto Regional Real Estate Board.

“The revenue generated from this will be insignificant compared to the $1.5 billion budget shortfall,” Laird adds.

Check out how much MLTT you’d pay with our Toronto LTT calculator

The new tax rate is part of a package of measures to help alleviate the city’s considerable fiscal gap. Other new revenue-generating steps passed by City Council include removing the cap on $5-per-hour street parking, requesting the implementation of a municipal sales tax / cut to HST from the province, as well as increasing the vacant home tax rate to 3% from the previous 1%. Council also is exploring plans to introduce a foreign buyer land transfer tax, as well as a graduated municipal property tax for secondary properties.

A background on Land Transfer Tax

Land transfer tax is paid by home buyers when acquiring a piece of land (such as a house or condo unit), or a beneficial interest in a property. In Ontario, LTT is levied by both the provincial government, as well as the City of Toronto – the only municipality in Canada with the ability to do so. LTT is a marginal tax, meaning each portion of your home’s value is taxed at its own marginal rate; it’s not just an average tax of your home’s value.

The other provinces that charge LTT are British Columbia, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island, and Quebec, within a range of 0.5 - 2% of the home’s total value. Other provinces and territories that don’t have an LTT may charge other fees for the purchase of a property; for example, in Nunavut, the territory charges home buyers $1.50 per every $1,000 of a home’s purchase value under $1 million, and $1,500 plus $1 for every $1,000 after that threshold.

Land transfer tax is considered a closing cost, meaning it must be paid in cash to complete the purchase of your property; it cannot be a cost that’s rolled up into your mortgage. Due to this, it’s important for home buyers to factor LTT and MLTT into their budgets when house hunting.

LTT rebates for first-time home buyers

Fortunately, for buyers breaking into the market for the first time, there are rebates available to take the sting out land transfer tax. These rebates are available at the provincial level in BC, Ontario, and PEI, at the following amounts:

  • Ontario: $4,000
  • British Columbia: $8,000
  • Prince Edward Island: $2,000

The City of Toronto also offers a rebate of $4,475 on its MLTT; this means qualifying first-time home buyers in Ontario can receive a total LTT rebate of $8,475 off their home purchase. In order to be eligible, buyers must:

  • Be a Canadian citizen or permanent resident of Canada.
  • Be 18 years or older.
  • Occupy the home within nine months of purchase.
  • Apply for the refund within 18 months of purchase.
  • The buyer’s spouse cannot have owned a home while being their spouse (but may be a previous homeowner).
  • If the home is newly constructed, it must be eligible for home warranty.

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Penelope Graham, Head of Content

Penelope has over a decade of experience covering real estate, mortgage, and personal finance topics and her commentary on the housing market is featured on both national and local media outlets.