Calculation of Land Transfer Tax is determined by the Land Transfer Tax Act (LTTA). The LTTA scheme for Land Transfer Tax consists of marginal brackets that are used to calculate the amount of Land Transfer Tax owing on each transaction of a purchase of a home. First-time homebuyers are eligible for a full tax rebate up to $4,000. Please see below for details on the eligibility criteria for the first-time homebuyer’s rebate. The tax rates for Land Transfer Tax are as follows:

EXAMPLE OF LAND TRANSFER TAX CALCULATION

For a purchase of property that is in the amount of $400,000:
    multiply $55,000 by 0.5% (55,000 × 0.005) = $275
    multiply the amount exceeding $55,000 up to $250,000 by 1.0% (195,000 × 0.01) = $1,950
    multiply the amount exceeding $250,000 up to $400,000 by 1.5% (150,000 × 0.015) = $2,250.
Total land transfer tax payable = $4,475.

If first-time home buyer, then total land transfer tax payable (4,475 – 4000) = $475

• You must be a Canadian citizen or permanent resident of Canada.
• You must be 18 years or older.
• You must occupy the home within 9 months of purchase.
• You cannot have owned a home or interest in a home anywhere in the world.
• Your spouse cannot have owned a home while being your spouse (but may be a previous home owner).
• If the home is newly constructed, it must be eligible for home warranty.
• Home buyers must apply for the refund within 18 months of purchase.

A very important consideration when purchasing a home, which most home-buyers are unaware of, is figuring out how you wish to take title to your home. The significance of this measure cannot be underestimated as this impacts your estate planning. As per Ontario law, there are three types of arrangements through which title can be acquired in a purchased home:

(1) Joint Tenancy
(2) Tenancy in Common
(3) Registered Owner

Joint Tenancy

Under this type of arrangement, two or more people acquire title in equal proportions(each 100%) to a home. When one person dies, his/her title is passed on to the surviving title holders. In legal terms, this is known as a “right of survivorship.” In colloquial terms, one can call it the “right of the last person standing.” What is important to note here, for the purposes of estate planning, is that the deceased person’s title automatically passes onto the surviving titleholders by law, and there is no additional need to specify this in a will. The last surviving title holder (the last person standing) acquires the title of all deceased titleholders and he/she can then control how the property is distributed after his/her death through a will.

For example, let’s say A, B, and C acquired title by Joint Tenancy in a home they purchased together. Several years later, A passes away. A’s title automatically passes on to B and C upon his death. Some time later B passes away. C has now acquired title of both A and B. This makes C the absolute titleholder and she can now decide to pass on the property to her son X after she dies through a will.

Tenancy in Common

Tenancy in Common allows two or more people to acquire title (not necessarily in equal proportions) in a property. Unlike the Joint Tenancy however, there is no right of survivorship. Under the Tenancy in Common arrangement, each person acquires a pre-determined portion of title in the property  (for example 50% and 50%, or 60% and 40%) and they get to control what happens to their portion of the title upon their death. In other words, the deceased person’s title remains in their control even after death and does not automatically pass on to surviving titleholders. Each titleholder can determine, through a will, what happens to their respective portion of title after their demise. They can also wish to sell their portion of title during their lifetime.

For example, let’s say A, B and C each acquired 1/3 title as tenants in common to a property they purchased together. Several years later B died and had left a will behind. According to B’s will, she wished to pass on her full title in the purchased property to her only son X. Thus, the titleholders of the property are now A, C, and X with each having a 1/3 title to the property.

As the name implies, the registered owner is the sole titleholder to a property. They can choose how they wish to deal with their property during their lifetime or after their death through a will.

The following formula is used to calculate the amount owing on the client’s trust ledger statement:

Total purchase price 

PLUS

Legal fees, disbursements 

MINUS

Total amount advanced by the bank

MINUS

Deposit

PLUS/MINUS

(Statement of Adjustments) Credits to Purchaser/Vendor

EQUALS

Amount Client Advances