Buying a home in Toronto is an exciting milestone, but many buyers are surprised to learn that their closing costs can include two separate land transfer taxes: the Ontario Land Transfer Tax (LTT) and the Municipal Land Transfer Tax (MLTT) charged by the City of Toronto.
Understanding these taxes before making an offer can help you budget accurately and avoid unexpected costs at closing.
What Is Land Transfer Tax?
Land transfer tax is a fee paid by the buyer when ownership of a property is transferred. In Ontario, the provincial government collects the Ontario Land Transfer Tax.
For properties located within the City of Toronto, buyers generally also pay the City of Toronto’s Municipal Land Transfer Tax.
This means a Toronto homebuyer may have to pay both provincial and municipal land transfer taxes on the same purchase.
Why Do Toronto Buyers Pay Two Taxes?
Toronto introduced its Municipal Land Transfer Tax in 2008. Since then, buyers purchasing property within the City of Toronto have generally been subject to two levels of land transfer tax.
The important distinction is location.
If you purchase a property elsewhere in Ontario, you generally pay the provincial land transfer tax. If you purchase a property within the City of Toronto, you may be responsible for both the provincial LTT and Toronto’s MLTT.
How Much Could You Pay?
Both taxes use progressive tax brackets based on the property’s purchase price.
For example, on a Toronto property priced at $1 million, the combined land transfer taxes can be substantial.
The exact amount depends on the purchase price and whether you qualify for any applicable rebate or exemption.
Because land transfer tax rates and rules can change, buyers should confirm the current calculations before closing.
First-Time Homebuyers May Qualify for Rebates
The good news is that eligible first-time homebuyers may qualify for rebates.
Ontario offers a first-time homebuyer land transfer tax refund, while the City of Toronto also provides a municipal land transfer tax rebate for qualifying buyers.
These rebates can significantly reduce the tax burden, although eligibility requirements apply.
Buyers should carefully review the rules because factors such as previous home ownership, property use, and residency requirements can affect eligibility.
Example: Buying a $1 Million Toronto Home
Imagine you’re purchasing a home in Toronto for $1,000,000.
You could potentially face:
- Ontario Land Transfer Tax
- Toronto Municipal Land Transfer Tax
- Legal fees
- Home inspection costs
- Title insurance
- Mortgage-related costs
- Adjustments for property taxes and utilities
- Other closing expenses
The land transfer taxes alone can represent a significant portion of your upfront costs.
That’s why it is important to calculate your total cash requirement before submitting an offer.
Toronto vs. Other Ontario Cities
One of the biggest differences for buyers is whether the property is located inside the City of Toronto.
For example, someone purchasing a home in a municipality outside Toronto generally does not pay Toronto’s MLTT.
A buyer purchasing within Toronto, however, generally pays both the provincial and municipal taxes.
This additional cost is an important consideration when comparing Toronto properties with homes in surrounding communities.
How to Prepare for Land Transfer Taxes
Before buying a Toronto property, consider these steps:
1. Calculate Your Estimated Taxes
Estimate both the provincial and municipal land transfer taxes based on the purchase price.
2. Check First-Time Buyer Rebates
If you’re purchasing your first home, determine whether you qualify for Ontario and Toronto rebates.
3. Budget for Other Closing Costs
Land transfer tax isn’t your only closing expense. Set aside money for legal fees, title insurance, inspections and other adjustments.
4. Speak With Your Real Estate and Legal Professionals
Your real estate professional and lawyer can help you understand the costs associated with your specific purchase.
Is Toronto Still Worth Buying?
Paying two land transfer taxes can make buying in Toronto more expensive upfront, but the tax should be considered alongside the property’s long-term value, financing costs, location, and your personal financial goals.
For some buyers, Toronto’s employment opportunities, transit, amenities, schools and established neighbourhoods may justify the additional purchase costs.
For others, nearby municipalities may offer lower upfront costs and different housing options.
The right choice depends on your budget and long-term plans.
If you’re buying a home in Toronto, don’t forget to account for the possibility of two land transfer taxes.
The Ontario Land Transfer Tax and Toronto Municipal Land Transfer Tax can add thousands of dollars to your closing costs. However, eligible first-time buyers may qualify for rebates that can reduce the amount payable.
Understanding these taxes before making an offer allows you to create a more accurate budget and avoid unpleasant surprises on closing day.
Before purchasing, always verify the current tax rates, rebates and eligibility requirements with the appropriate government sources and your legal professional.
