Ontario First Time Homebuyer Series Part 4: Ontario Land Transfer Tax Refund

By of Merovitz Potechin LLP on Tuesday February 25, 2020.

Buying your first home is a big step in your personal and financial life. As a first-time homebuyer, you likely have many questions regarding all aspects of the process. In this four-part series, we will be exploring some of the basics regarding the first-time home buying experience so that you can have a good understanding of what to expect and how best to approach this important step both legally and financially.

Read Part 1 – Homebuyers’ Tax Credit
Read Part 2 – Homebuyers’ Plan
Read Part 3 – First-Time Homebuyer Incentive

Part 4: Ontario Land Transfer Tax Refund

Do you have to pay land transfer tax on your first home in Ontario? As is the case in most other provinces, the answer is yes. To help with this financial burden, the Ontario government offers a refund on all or part of your land transfer tax, if you’re an eligible first-time homebuyer. Let’s look at how much is covered.

How much can a first-time homebuyer qualify for?

First-time homebuyers in Ontario can qualify for a rebate equal to the full amount of their land transfer tax, up to a maximum of $4,000.

Based on the Ontario land transfer tax rates, the rebate will cover the full tax amount of land transfer tax up to a maximum purchase price of $368,333. For purchase prices over $368,333, homebuyers will qualify for the maximum rebate, but will still owe the remainder of their land transfer tax.

Who is entitled to the refund?

To qualify for the Ontario Land Transfer Tax Refund for First-Time Homebuyers, you must meet the following criteria:

• You must be a Canadian citizen or permanent resident of Canada
• You must be 18 years of age or older
• You must live in the home within 9 months of purchasing it
• You cannot have owned a home before; and
• If you have a spouse, your spouse cannot have owned a home during the time he or she was your spouse.

How can a lawyer help?

There is a time limit to apply. A qualifying purchaser must apply within 18 months after the date of registration of the transfer of title. However, as most transfers of title these days are completed using electronic registration, qualifying purchasers can receive the refund of Land Transfer Tax at the time of completing the transaction, as opposed to applying for it after the transaction has completed. This means that if you are eligible for the Land Transfer Tax refund, you either do not pay Land Transfer Tax at all on your purchase, or you will pay a reduced amount on closing.

All of this filing is done upfront with your lawyer during the purchase as it must be shown that you are a first-time homebuyer.

What happens if you are buying a property with someone else?

The rules vary depending on whether the purchasers are spouses of one another. If the purchasers are not spouses, the amount will be reduced if one (or more) of the purchasers is not a first‑time homebuyer. The refund will be proportionate to the interest acquired by the individuals who qualify.

For example, where a parent who is not a first-time homebuyer, and a child who is a first-time homebuyer, purchase a home with equal 50/50 interests, the child may claim 50% of the land transfer tax refund.

Buying your first home with a spouse

When it comes to spouses, the rule is all or nothing. To qualify for the rebate, your spouse cannot have owned a home during the time you have been spouses of each other. In other words:

• If you are qualifying spouse and your partner has owned a home before becoming the spouse, but not while being your spouse, you can claim the maximum refund amount applicable to your transaction. In other words, you can claim the refund for your interest and as well as your spouse’s interest (i.e. up to the maximum amount of $4,000).

• However, if you are a qualifying spouse and your partner owned a home while you were spouses of each other, then you do not qualify for the rebate. This applies even if you did not live in the house together.

Your partner’s eligibility depends on whether you are spouses as defined in section 29 of the Family Law Act. Please refer to the Definitions section for the meaning of spouse.

Can you requalify for the refund?

Unfortunately, the answer is no. Ontario does not allow you to re-qualify as a first-time homebuyer, as you might be able to do under the Homebuyers’ Plan.

If you are a first time homebuyer and have any additional questions regarding qualifying for the Ontario land transfer tax refund, contact real estate lawyer Frank Bourgault at Merovitz Potechin LLP.