When buying a home or land in Canada, there is something to be aware of and that is Land Transfer Tax. This includes quite a few definitions of what constitutes land such as structures, buildings, fixtures, structures that are going to be constructed and land itself.
How Is It Calculated?
Land Transfer Tax is calculated by on the value of the consideration. What this means is that in some instances, it could be the fair market of the land. This Land Transfer Tax includes cost of upgrades, soft costs, the purchase price, benefits conferred, and liabilities assumed. The good news is that first time home buyers may qualify for a refund of part of the tax or in some cases, all of the Land Transfer Tax.
There are variances in places such as with a vacant lot. In this case, the value of consideration is based on a couple of items: It encompasses the total that was paid for the lot and what the cost of construction on that lot will be.
In other cases, the Land Transfer Tax is based on the fair market of the land while typically it is based on what was paid for the land. For example:
- The transfer of a lease when the remaining term is one that can be more than 50 years
- When shares of a corporation are listed and the transfer of the land was made to a corporation
- Or a land from a corporation that is being transferred to a shareholder
Refunds for First Time Home Buyers
As stated above, there is recourse when having to pay for Land Transfer Tax if you are a first time home buyer. There are obviously a few eligibility requirements that include:
- You must legitimately be a first time home buyer meaning you cannot requalify
- You must be at least 18 or older
- You cannot have owned a home and that means anywhere and in any other country, not just Canada
- Your spouse falls under the same rules when it comes to home ownership meaning they cannot have owned another home anywhere in the world
The refund depends on the date of the agreement of purchase and sale. For example, if a home was purchased before the date of December 14, 2007 then there is a refund that applied to the sale of a newly built home. But, if the purchase was made after this date of December 14, 2007, the refund is for all homes, not just those that are newly built but also resales.
The refund amounts vary. Before January 1, 2017 the refund amount was just $2000 as a maximum. However, after this date, the maximum refund you can get has doubled to $4000. However, this only applies to dispositions or conveyances after that date in January of 2017.
How Much Will I Get?
This really depends and there is a maximum refund of either $2000 or $4000. To qualify for the $2000 refund it is for dispositions or conveyances than happen prior to January 1, 2017. To qualify for the larger refund of $4000, the dispositions or conveyances had to happen after the date of January 1, 2017. It doesn’t matter what date it happens as long as it is after that date. However, also starting on that same date, no Land Transfer Tax has to be paid by those who qualify as a first time home buyer on the first $368K of the on a home that is eligible. Those above that price would get the $4000 maximum refund.
Oakville Real Estate Law is one of the top firms in Canada for real estate transactions. The firm’s team led by Robert Rose has worked on thousands of transactions the years and have the knowledge and experience you need. For more information, please contact us and we will be glad to help.