Taxes on a New House: What to Expect in Ontario

Written on behalf of Campbells LLP
Posted on January 9, 2023
house

Maybe you’ve found your dream home or simply dreaming of home ownership. In either case, you’re probably wondering about the costs beyond your mortgage payments, like taxes on a new house. So, what do you need to know? 

This article will discuss the taxes associated with new home ownership and other frequently asked questions. At its core, home ownership can come with many surprising and unexpected costs, so it is important to understand your obligations long before you enter into a contract of purchase and sale. If you have questions regarding the information below or your eligibility for the potential rebates we’ve outlined, be sure to speak with an experienced real estate lawyer. 

 

Taxes When Purchasing Residential Real Estate

When purchasing real estate in Ontario, there are several tax considerations you willl want to keep in mind. 

 

Land Transfer Tax in Ontario

Anyone who purchases property in Ontario will be required to pay the Land Transfer Tax. This tax is based on the amount you pay for the property, as follows:  

  • 0.5% (for amounts up to and including $55,000),
  • 1% (for amounts above $55,000, up to and including $250,000),
  • 1.5% (for amounts above $250,000, up to and including $400,000),
  • 2% (for amounts above $400,000), or
  • 2.5% (for amounts above $2,000,000 if the land includes one or two single-family homes). 

If you are a first-time home buyer and meet the qualification requirements, you will not need to pay Land Transfer Tax on the first $368,000 of the value of your home. 

For more information on the Land Transfer Tax, review the Ontario government’s publication on Land Transfer Tax.  

 

Land Transfer Tax Rebate for First-Time Home Buyers

If you’re a first-time home buyer, you may be eligible for the Land Transfer Tax refund for first-time home buyers. 

To be eligible for the Land Transfer Tax refund, you must: 

  • Be 18 or older;
  • Have not owned a home (or an interest in a home) anywhere in the world; and
  • Not have a spouse who has owned a home (or an interest in a home) anywhere in the world while they were your spouse. 

The maximum refund amount is $4,000 and is calculated based on several factors. 

For more information on the Land Transfer Tax rebate, review the Ontario government’s publication on Land Transfer Tax Refunds for First-Time Homebuyers. 

 

Additional Land Transfer Tax in Toronto

Beyond the Land Transfer Tax, anyone who purchases property in Toronto will pay the Municipal Land Transfer Tax in addition to the Land Transfer Tax. The Municipal Land Transfer Tax is calculated as follows: 

  • 0.5% (for amounts up to and including $55,000),
  • 1% (for amounts up to and including $400,000), or
  • 2% (for amounts above $400,000).

 

Harmonized Sales Tax for Real Estate in Ontario 

The Harmonized Sales Tax (HST) is a 13% tax applied to the sale of goods in Ontario. Typically, you won’t have to pay HST on residential real estate unless the property is a “new build” or has been substantially renovated. However, you will need to pay HST on various services relating to your closing costs, such as legal fees, real estate commissions, and title insurance. 

You can review the Ontario government’s publication on Harmonized Sales Tax (HST) for more information. 

 

Taxes When Purchasing “New Build” Real Estate

On top of the above taxes, you may have additional tax obligations if you purchase a “new build” home, such as from a builder.  

 

Harmonized Sales Tax for New Builds in Ontario

If you purchase a new or substantially renovated home from a builder, you will likely need to pay 13% HST. HST is calculated based on the price paid for the property. 

 

New Housing Rebate for GST/HST

You may be eligible for the GST/HST new housing rebate if you purchase a new build. Typically, you will be eligible if: 

  • You are purchasing a new or substantially renovated house from a builder for use as your primary place of residence,
  • You have purchased shares in a cooperative housing corporation to use a unit as your primary place of residence, or
  • You have built or substantially renovated a home (or hired someone else to do it) for use as your primary residence if the fair market value is less than $450,000.

As the above examples demonstrate, using the property as your primary residence is key to qualifying for the rebate – you will not be able to claim a rebate if, say, you are purchasing a new property to rent out. 

For more information, including how to claim your rebate, review the Ontario government’s publication on the GST/HST new housing rebate. 

 

Other Tax Considerations for Home Buyers

As we’ve outlined, there are several taxes and rebates to consider when purchasing a property in Ontario. But taxes on a new house do not end once your deal closes. There are ongoing taxes relating to your property that you need to consider. 

 

Annual Property Taxes in Ontario

If you own property in Ontario, you will have to pay an annual property tax, the amount of which varies depending on: 

  • The location of your property;
  • The budget needs of your property; 
  • The type of property; and
  • The assessed value of your property.

If your property is located outside of a municipality, you will pay the provincial land tax instead of the property tax. 

For more information, review the Ontario government’s publications on property tax and provincial land tax. 

 

Property Tax Rebates in Ontario 

Ontario offers some property tax rebates for qualifying individuals, as follows: 

  • Ontario Energy and Property Tax Credit: You may be eligible for a credit to help pay your property taxes if you are 18 or older, you are currently or were previously married or in a common-law relationship, live or lived with your child and paid property taxes in 2021. The credit ranges from $249 to $1,277 depending on your circumstances.
  • Senior Homeowners’ Property Tax Grant: This grant is available to help pay property taxes if you are 64 or older, reside in Ontario, paid Ontario property tax in the previous year, owned and occupied your principal residence, and earned less than $50,000 (or $60,000, combined between yourself and your spouse). The grant offers up to $500 each year, depending on your income. 

For more information on tax rebates in Ontario, consult the Ontario government’s guide to tax credits and benefits. 

 

Oakville Real Estate Lawyers Representing Buyers, Sellers, and Professionals

Whether you are buying your first home, purchasing a cottage or investment property, or selling your home to downsize to a condo, the real estate lawyers at Campbells LLP can guide you through every step of your residential real estate transaction. We will explain your options, review all relevant paperwork and contracts, negotiate on your behalf, and defend your interests in any potential disputes that may arise. 

We provide a wide range of legal services related to buying and selling property and are here to meet your real estate law needs. To speak with one of our experienced real estate lawyers, contact us online or call us at 905-828-2247.