Toronto Land Transfer Tax

Looks like after months of debate and searching for alternatives our elected city counilors voted to endorse two controversial new taxes – one on land transfers and the other on vehicle registrations. Now in Toronto, all home buyers need to pay an Ontario tax, plus an additional Toronto Land Transfer Tax. Here is the Toronto tax on a $450,000 home as an example:

$0 to $55,000 is .5% = $275
$55,000 to $400,000 is 1% = $1,950
above $400,000 is 2% = $1,000

Total Toronto land transfer tax = $4,725

An important note is that first time buyers do not pay the Toronto Tax on the first $400,000. Councillors adopted a so-called compromised version which exempts first-time home buyers from paying anything on the first $400,000 of a new or re-sale home. This seems to indicate that Toronto is looking to tax people who are buying their second home (ie. moving up or downsizing). It looks like Toronto is trying to get their hands on the increase in value that has come over the last 7 years.

The tax will take effect on February 1, 2008, and not on January 1, 2008, as originally proposed. Purchasers with a signed Purchase and Sale Agreement entered into before December 31, 2007, will pay the tax, but will receive a full rebate of the tax regardless of whether or not they close after February 1, 2008. Purchasers with a signed Purchase and Sale Agreement signed after December 31, 2007, with a closing date before February 1, 2008, will not be required to pay the tax.

Here are the tax rates for clarification.
the first $0 - $55,000 of property value has a tax rate of 0.5%
the next $55,000 - $400,000 has a tax rate of 1%
beyond $400,000 the tax rate is 2% for 1 and/or 2 single family residences. If the land is commercial (including multi-residential) then the rate is 1.5% up to $40 Million.
For commercial properites (including multi-residential) beyond $40 Million the rate is 1%

source:
Globe and Mail, EFF GRAY AND JENNIFER LEWINGTON
Aird & Berlis LLP