The provincial land transfer tax can add an additional 1 to 2 per cent on the cost of a home purchase if you live outside of Toronto. If you buy in Toronto, the amount is almost double. The Toronto Real Estate Board has been lobbying for five years to remove this tax, claiming that it penalizes buyers in Toronto, who already face record high prices. It also reduces the number of potential sales in Toronto, and thus reduces overall economic activity. It is interesting that no other city in Ontario has introduced this tax, even though they have the power to do so. The problem is that the city needs the money that the tax brings.
First time buyers do get a break as they pay no Toronto land transfer tax when their home costs $400,000 or less. But for everyone else buying a $400,000 home in Toronto, the tax is $3,725, and rises to $15,425 if the purchase price is one million dollars, very common now in Toronto. This is in addition to the $16,475 Ontario land transfer tax that has to be paid. So the total land transfer tax in Toronto today for a 1 million dollar home is $32,000.
As the race for mayor heats up it may become an issue. Karen Stintz says she wants to reform the tax so that it is applied at a higher amount to make the tax fairer. Mayor Rob Ford would like to reduce the total tax by at least 5 per cent. David Socknacki would like to tie it in to the rate of inflation. John Tory has not yet stated his position.
Here are some ways the candidates could change things for the better: • Reduce the tax by 10 per cent;
• Raise the credit for first time home buyers, to $5,725, which would make no Toronto land transfer tax payable for a home up to a price of $500,000;
• Change the policy so that anyone buying their first home in Toronto gets the rebate, even if they owned a home elsewhere in Ontario.
• Change the policy so everyone pays no tax on the first $400,000 in Toronto, regardless whether you owned a home before;
Here are some other things to consider when it comes to the land transfer tax
First time buyer rebates
If you buy your first home outside Toronto, you pay one tax only and are entitled to a $2,000 rebate. As stated above, the second rebate in Toronto is up to $3,725. So, if you have the means and the choice, I recommend buyers buy their first home in Toronto, take the extra rebate, and then buy their next home elsewhere if they so choose. When you buy your first home outside Toronto, you will then have to pay the double tax without any rebate if you later move to Toronto.
Spouse rules
If your spouse has owned a home while married to you, you are not entitled to the first time buyer rebate, even if you never owned a home yourself. However, if your spouse sold the home before marrying you, then you are still entitled to a rebate. So, for example, if you and your spouse jointly buy a home, you would be able to claim 50 per cent of the tax rebate, which is up to $1,000 in Ontario and $1,812.50 in Toronto.
Here it gets interesting. If you take title differently, with your spouse owning 1 per cent and you owning 99 per cent of the home, then you can get 99 per cent of the rebate, which means $1,980 on the Ontario tax and $3,692.75 towards the Toronto tax.
Family transfers
If you transfer property to your spouse, for natural love and affection, no land transfer tax is payable. If a parent transfers a property to a child for no money, there is no land transfer tax payable as long as the property has no mortgages registered against it. If the property is worth $500,000 and there is a mortgage on title with $200,000 outstanding, land transfer tax will have to be paid on the sum of $200,000.
Understand the land transfer tax rules and save money.
Click here to read the article:
http://www.thestar.com/business/personal_finance/2014/02/28/ontario_land_transfer_tax_an_election_issue.html
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