You have been saving money and making plans, and the time is finally here. You are buying your first house. Firstly, this is a very exciting step and a new chapter in your life as you will now own your property. Secondly, the good news does not stop there.
You may qualify for something called Land Transfer Tax (LTT) rebate. When you purchase a property, you may need to pay land transfer taxes as part of your closing costs. Some provinces, however, to alleviate this burden on first-time buyers may send part of those taxes or even all of it back.
If you are going through your first purchase, or are planning to go through one soon, you know how every penny counts. We will address Land Transfer Tax rebate on the following topics to understand how it works and if you are eligible for it.
How Do I Qualify?
A Land Transfer Tax rebate is available in a few selected provinces, being them Ontario, British Columbia, and Prince Edwards Island. In the City of Toronto, you can also claim a separate Land Transfer Tax rebate.
To qualify for the Land Transfer Tax rebate, you must meet certain criteria and they change depending on the province or municipality that you are in.
In Ontario, there are two rebates you can claim – the Land Transfer Tax rebate from Ontario and if you are in the City of Toronto, the Municipal Land Transfer Tax rebate.
Going one step at a time, the Land Transfer Tax rebate from Ontario requires you to be a Canadian citizen or a permanent resident over the age of 18. If you have a partner, they cannot own a home for the time they have been your partner, or you may only be eligible for a partial rebate of 50%. The property must have been bought to be your primary residence and you must live in it within 9 months of purchasing.
You have 18 months to apply for the rebate after the land transfer date and may get up to $4,000 back. This maximum amount can cover the full amount of taxes for properties up to $368,333, anything above that you may still be eligible for the rebate, but will be responsible for anything that the rebate won’t cover.
The City of Toronto
As mentioned, if you are purchasing a property in The City of Toronto can make you eligible for an additional rebate called the Municipal Land Transfer Tax (MLLT) rebate. You must meet all criteria that the provincial Land Transfer Tax rebate requires, what makes it different is that even if you are not a Canadian citizen or permanent resident, but are to become one in 18 months from the time you purchase the property you are still eligible to apply for the Municipal Land Transfer Tax rebate.
The maximum amount the Municipal Land Transfer Tax rebate goes up to is $4,475, that is, the full amount of a $400,000 property in taxes. Just like its provincial counterpart, anything above $4,475 is the responsibility of the buyer.
To be eligible for a Land Transfer Tax rebate in Ontario you need to be at least 18 years old and a permanent resident or a Canadian citizen. The residence you are purchasing needs to be where you will live – so properties being bought for rental do not qualify.
If you aren’t a permanent resident, but you become one before a one-year period counting from the registration date, then you may apply for a Land Transfer Tax refund.
British Columbia differs quite a bit from Ontario and The City of Toronto on a few criteria. Firstly, you must have lived 12 consecutive months immediately prior to purchasing your property in BC, or filled at least 2 income tax returns in B.C. within the past 6 years. Secondly, you must move in into the residence within 92 days to qualify for the rebate.
The amount also varies with property size and value. Properties up to $500,000 will receive a full rebate. Properties valued between $500,000 and $524,999 will receive only a partial rebate, and anything above the mark of $525,000 are not eligible for rebates.
Similar to Ontario, you have 18 months counting from the transfer date to apply for the rebate. If you are purchasing the property with a partner who isn’t a first-time buyer, and the value of the property is below $524,999 you are still eligible for a partial rebate.
Prince Edwards Island
Just like the other provinces, Prince Edwards Island requires the buyer to be a Canadian citizen or permanent resident to be eligible for the rebate, as well as being over 18 years of age. And just like British Columbia, it has requirements regarding where the buyer was living prior. In Prince Edwards Island to be eligible for the Land Transfer Tax rebate, you must have lived 6 consecutive months immediately prior to the purchase, or filled at least 2 income tax returns within the past 6 years.
The maximum amount the Land Transfer Tax rebate goes to is $2,000, and differently from the other provinces, if you are purchasing the property with a spouse both need to be first-time buyers to be eligible to apply for the rebate – that means that if one of you aren’t, there are no partial rebates available like in Ontario and British Columbia.
If the property being purchased costs less than $30,000 then there are no land transfer taxes due, so a rebate won’t be necessary. Anything between $30,000 and $200,000 can receive a full rebate from the province. Properties above the threshold of $200,000 are not eligible for the rebate so the buyer will be responsible for the full amount of transfer taxes.
How to Apply?
The process of applying varies from province to province, and that is when having an experienced real estate lawyer by your side will come in handy. They will take care of all the paperwork appropriately for you and help you with all questions you may come up with during the process so you can worry about other things and enjoy the moment of owning your own home.
As experienced professionals, Calgary real estate lawyers are used to the process and will ensure all deadlines and the proper documents are filled and sent to the government.
Using the most of those incentives is in your best interest, provided you meet all criteria you should be able to receive partial to full Land Transfer Tax rebates or refunds.