Land Transfer Tax - $400K

6756 Views 12 Replies 6 Participants Last post by OhGreatGuru, Jan 8, 2010

Wealthy1Day

Discussion Starter · Dec 3, 2009

In Ontario, I understand that the Land Transfer Tax is 2% on the amount that exceeds $400K. (Also, in Toronto, the city land transfer tax is fully rebated if the purchase price is under $400K).

My question is does the purchase price of $400K+ include the purchase price of a parking spot and locker? Or are they considered 3 separate purchases under $400K?

For example, if the condo costs $399,900, parking spot is $30,000, and locker is $5,000, is land transfer tax calculated on the sum of $434,900 or is it calculated on each individual item purchased?

I wonder because it can be argued that 3 separate properties are being purchased. Much like buying a condo without parking, but then buying a parking spot after the purchase of the condo.

How is land transfer tax calculated over the entire purchase of condo, parking spot, and locker?

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OhGreatGuru

· #2 · Dec 4, 2009

I don't know the answer to your question. But the way you phrase it you seem to think there is no land transfer tax below $400K. That's not correct. See http://www.rev.gov.on.ca/en/bulletins/ltt/2_2005.html

2% is the tax rate above $400k. The rates up to $400K are just lower.

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iherald

· #3 · Dec 4, 2009

I don't know how it works on condo's, but my guess is that you're paying the transfer tax on the 439xxx

Don't forget that some of the rebates on land transfer are only for first time home buyers:

Currently, the land transfer tax in ONTARIO is as follows:
0.5% - on the first $55,000
1.0% - on portion between $55,000 - $250,000
1.5% - on balance over $250,000
2.0% - on anything over $400,000
First time buyers get a $2,000 rebate

And the new land transfer tax in TORONTO is as follows:
0.5% - on the first $55,000
1.0% - on portion between $55,000 - $400,000
2.0% - on anything over $400,000
First time buyers are exempt on the first $400,000

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Wealthy1Day

Discussion Starter · #4 · Dec 4, 2009

OhGreatGuru said:
I don't know the answer to your question. But the way you phrase it you seem to think there is no land transfer tax below $400K. That's not correct. See http://www.rev.gov.on.ca/en/bulletins/ltt/2_2005.html

2% is the tax rate above $400k. The rates up to $400K are just lower.

I realize there will be land transfer taxes regardless of the purchase price. What I'm curious about is whether the highest bracket is avoided when taking into consideration the condo, parking space, and locker separately.

From what I've been able to uncover so far, it appears that the taxes are applied on the total purchase sum in disregard of the breakdown of the "separate properties".

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Wealthy1Day

Discussion Starter · #5 · Dec 4, 2009

iherald said:
I don't know how it works on condo's, but my guess is that you're paying the transfer tax on the 439xxx

Don't forget that some of the rebates on land transfer are only for first time home buyers:

From what I can tell, I think you're right that the tax is calculated on the total purchase sum.

I am a first time home buyer and so if the taxes were calculated separately on the condo, parking, and locker than I'd be fully rebated. But I'd pay some Toronto land transfer tax should the sum of all the parts exceed $400K.

That's what seems to be apparant thus far.

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Ashish

· #6 · Dec 7, 2009

Land Transfer tax and Property tax

Hi

I am new to Canada & I was wondering if Land Transfer tax is one time fee?
Is there any property tax on yearly basis?If yes,How much it will be in Toronto?

Also wondering if ON & Toronto will charge separately?

Thanks for your response!
Ashish

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OhGreatGuru

· #7 · Dec 7, 2009

I am tempted to tell you to google the info. But in the spirit of Christmas, here goes:

Land Transfer tax is charged by the province when a property is sold. It is not an annual tax.
Property Tax is a tax payable annually to your municipality for the support of municipal government services and schools. (The school tax rate is actually determined by the school boards, but it is collected on their behalf by the municipality, and is based on the same property assessment value.) Most municipalites collect it in two instalments, unless you have an arrangement to pre-pay it over a year.

If you have a large mortgage, the mortgage company will usually require property taxes to be paid to them in monthly instalments as part of the mortgage payments, ao that that the owner cannot default on the taxes.

Property taxes can vary widely across the country. Suggest you check local real estate sites for average taxes in Toronto.

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Ashish

· #8 · Dec 8, 2009

Thank you very much!

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iherald

· #9 · Dec 8, 2009

Ashish said:
Hi

I am new to Canada & I was wondering if Land Transfer tax is one time fee?
Is there any property tax on yearly basis?If yes,How much it will be in Toronto?

Also wondering if ON & Toronto will charge separately?

Thanks for your response!
Ashish

I think you can estimate .75% of the assessed value of your house to be your property taxes in the city of toronto.

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Wealthy1Day

Discussion Starter · #10 · Dec 9, 2009

I noticed new condo developers use either .85% or 1%, but then over the course of a year it's very high.

Is that the rate they use to calculate the property tax portion of occupancy fees?

Then do they reimburse you annually based on the actual taxes?

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Toronto.gal

· #11 · Jan 8, 2010

Ashish said:
Hi

I am new to Canada & I was wondering if Land Transfer tax is one time fee?
Is there any property tax on yearly basis?If yes,How much it will be in Toronto?

Also wondering if ON & Toronto will charge separately?

Thanks for your response!
Ashish

Welcome to Canada Ashish!

You have already gotten replies, but here is a link that might be helpful to you in understanding the break-up of taxes in the city of Toronto.

http://www.toronto.ca/taxes/property_tax/tax_rates.htm

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lb71

· #12 · Jan 8, 2010

Wealthy1Day said:
I realize there will be land transfer taxes regardless of the purchase price. What I'm curious about is whether the highest bracket is avoided when taking into consideration the condo, parking space, and locker separately.

From what I've been able to uncover so far, it appears that the taxes are applied on the total purchase sum in disregard of the breakdown of the "separate properties".

That is correct. Now, if you trying to buy each of the three pieces in separate transactions, you may get a different story. Ask your lawyer about it when going to sign the papers. Let us know the answer if you do.

However, thay may end up with other costs to compensate for the saved LTT. For example, the lawyer may charge more for the paperwork. Or perhaps the purchase of the spot and locker are no longer considered property and then you have to pay retail sales tax.

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OhGreatGuru

· #13 · Jan 8, 2010

Or perhaps the purchase of the spot and locker are no longer considered property and then you have to pay retail sales tax.

That's an interesting point lb71. If they separated the transactions, the locker and parking spot might just be annual rentals, on which you would pay GST/PST (soon to be HST).

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