Buying a home involves more than saving for a down payment and qualifying for a mortgage. One closing cost that buyers sometimes underestimate is Land Transfer Tax (LTT).
In Ontario, Land Transfer Tax is generally payable by the purchaser when ownership of a property is transferred. For buyers purchasing property in the City of Toronto, there is an additional Municipal Land Transfer Tax (MLTT), which can significantly increase the amount required on closing.
Understanding these taxes and budgeting for them before signing an Agreement of Purchase and Sale is an important part of preparing for a successful closing.
What Is Land Transfer Tax?
Land Transfer Tax is a provincial tax payable when a purchaser acquires an interest in land in Ontario. In a typical residential purchase, the tax is calculated based on the value of the consideration, which is generally the purchase price. The tax is normally collected by the purchaser’s lawyer when the transaction closes and is paid as part of the electronic registration of the transfer. Because Land Transfer Tax is generally not included in your mortgage, buyers should plan to have these funds available in addition to their down payment, legal fees, title insurance and other closing adjustments.
How Is Ontario Land Transfer Tax Calculated?
Ontario uses a graduated tax system. This means that the entire purchase price is not taxed at one rate. Instead, different portions of the purchase price are taxed at different rates.
For residential properties containing one or two single-family residences, the provincial rates are generally:
- 0.5% on the first $55,000;
- 1.0% on the portion above $55,000 up to $250,000;
- 1.5% on the portion above $250,000 up to $400,000;
- 2.0% on the portion above $400,000; and
- 2.5% on the portion above $2,000,000 where the property contains one or two single-family residences.
The graduated structure is important. For example, if you purchase a home for $1,000,000, you do not simply pay 2% of the entire purchase price.
The Ontario Land Transfer Tax on a $1,000,000 purchase would be approximately $16,475 before any available first-time homebuyer refund.
First-Time Homebuyers May Qualify for a Refund
Ontario provides an important Land Transfer Tax refund for qualifying first-time homebuyers.
The maximum provincial refund is currently $4,000. However, being a “first-time buyer” for everyday purposes does not necessarily mean that you qualify for the Land Transfer Tax refund.
Among other requirements, the purchaser generally must:
- be at least 18 years old;
- occupy the home as their principal residence within nine months of the transfer;
- never have owned a home, or an interest in a home, anywhere in the world; and
- meet the applicable Canadian citizenship or permanent residency requirements.
A spouse’s previous home ownership can also affect eligibility. Buyers should therefore tell their lawyer about any previous ownership of residential property, including property outside Canada, before assuming they qualify for the refund. Where only some of the purchasers qualify as first-time buyers, the available refund may also be limited based on the qualifying purchaser’s interest in the property.
In most qualifying transactions, the refund can be claimed directly at the time of registration so that the buyer pays only the net Land Transfer Tax owing. If it is not claimed on closing, an eligible purchaser may subsequently apply to the Ministry of Finance, subject to the applicable deadline. Ontario currently requires first-time homebuyer refund applications to be made within 18 months of the transfer.
Buying in Toronto? There Is a Second Land Transfer Tax
Purchasers buying within the City of Toronto must pay not only Ontario Land Transfer Tax but also Toronto’s Municipal Land Transfer Tax. This can come as an unpleasant surprise to buyers who have only budgeted for the provincial tax. For many residential purchases, the lower Toronto MLTT brackets broadly mirror the provincial structure. However, Toronto also imposes higher graduated rates on high-value residential properties. Effective April 1, 2026, Toronto revised the higher MLTT brackets applicable to residential properties containing one or two single-family residences.
The practical point for buyers is simple: if you are purchasing in Toronto, your total land transfer taxes can be substantially higher than for a similarly priced property elsewhere in Ontario.
For example, on a $1,000,000 Toronto home, the provincial LTT is approximately $16,475 and the Toronto MLTT is also approximately $16,475, for a combined total of approximately $32,950 before any applicable first-time buyer refunds.
Toronto First-Time Homebuyer Rebate
Toronto also has its own first-time purchaser rebate, separate from the Ontario refund.
The maximum Toronto MLTT rebate is currently $4,475. Toronto’s 2026 budget materials confirm that the City has maintained the maximum rebate at this amount.
This means that an eligible first-time buyer purchasing in Toronto may potentially benefit from:
- Ontario LTT refund: up to $4,000
- Toronto MLTT rebate: up to $4,475
- Potential combined relief: up to $8,475
The availability and amount of each rebate depend on the purchaser’s circumstances and ownership structure.
In addition to the MLTT itself, the City of Toronto also charges an administration fee of $115.89 in connection with the tax. This fee is payable on closing and should be included when calculating the total amount of funds required to complete the transaction.
What Happens When One Buyer Is a First-Time Buyer and the Other Is Not?
The first-time buyer should not automatically assume that the entire transaction qualifies for the maximum rebate. The amount available can depend on each purchaser’s ownership interest, their relationship to one another and, particularly for spouses, when the previous property was owned.
A purchaser will generally not qualify for the first-time homebuyer Land Transfer Tax rebate if, while they were spouses, they lived in a home owned by their spouse, even if the purchaser has never personally owned a home. However, if the spouse disposed of the property before they became spouses, the spouse’s prior home ownership will generally not affect the purchaser’s eligibility.
This is one reason buyers should discuss the proposed ownership structure with their real estate lawyer before closing, rather than assuming the rebate will automatically be available.
What About Adding Parents or Other Family Members to Title?
Buyers sometimes plan to include a parent or another family member on title because that person is assisting with financing or is required by the mortgage lender. This can have Land Transfer Tax consequences and may also affect the availability of a first-time buyer refund. The way title is structured, including the percentage of ownership being acquired by each person could matter. If your lender requires another person to be registered on title, discuss this with your lawyer as early as possible. Do not assume that someone can simply be “added to title for the mortgage” without legal or tax consequences.
Land Transfer Tax Can Also Apply When There Is No Traditional Sale
Land Transfer Tax is not limited to a conventional purchase from an unrelated seller. It may arise when ownership is transferred between family members, when someone is added to title, when property is transferred following a separation, or when beneficial ownership changes. While,LTT is not payable on the transfer between spouses, it is payable when the transfer takes place between family members.
Whether tax is payable depends on the circumstances, including whether money is being paid, whether an existing mortgage is being assumed and whether a statutory exemption applies. An assumption of mortgage debt can constitute consideration for Land Transfer Tax purposes.Legal advice as well as Tax advice should therefore be obtained before transferring or restructuring ownership of real property.
Non-Resident Speculation Tax Is Different
Land Transfer Tax should also not be confused with Ontario’s Non-Resident Speculation Tax (NRST).
The NRST is a separate tax that can apply where residential property is acquired by certain foreign nationals, foreign corporations or taxable trustees. Ontario currently states that the NRST rate is 25% of the value of the consideration and, importantly, the tax may apply to the full value of the property where even one of several purchasers is a foreign entity, subject to the applicable legislation, exemptions and rebate provisions. The potential amount is significant. Buyers whose citizenship, residency or ownership structure may raise NRST issues should obtain advice before entering into the transaction.
Speak With Your Real Estate Lawyer Early
Your real estate lawyer does more than register the property on closing. Your lawyer can help determine the Land Transfer Tax Rebate eligibility and flag circumstances that could create additional tax consequences. If you are purchasing a home in Ontario, particularly if you are a first-time buyer, purchasing in Toronto, buying with family members or have previously owned property outside Canada, getting advice early can help you understand the true cost of the transaction before closing day arrives.
If you are preparing to purchase a home in Ontario, especially in Toronto or with a spouse, parent, or other family member on title, it is worth reviewing the Land Transfer Tax implications before closing. You can also use our Land Transfer Tax Calculator to estimate the LTT that may apply to your purchase and better understand the funds you may need on closing. MBLAW Professional Corporation can help you confirm the taxes and rebates applicable to your transaction, review your proposed ownership structure, and identify issues that could affect your closing costs. Contact our real estate team early so you can plan your purchase with a clearer understanding of the legal and financial obligations involved.
