What is the First-Time Home Buyer Land Transfer Tax Rebate?

Buying your first home is an exhilarating journey, filled with dreams of the future but also quite a few financial hurdles. You have to save up enough for a downpayment, get approved for a mortgage, and be confident in your ongoing ability to service that mortgage, amongst all the other home ownership costs. On top of that, our provincial (and sometimes municipal) government charges a Land Transfer Tax (LTT) in Ontario. This tax is no joke as its calculation is directly attached to the purchase price of your home. However, the Ontario government offers some relief for first-time homebuyers: a Land Transfer Tax Rebate. Let's dive into what this means for you.

Understanding the Land Transfer Tax

Before we talk about the rebate, let’s explore what the Land Transfer Tax is and how it impacts you. This provincial tax (and sometimes also municipal tax) is applied on the transfer of property ownership, impacting both residential and commercial transactions. Unfortunately this tax is a part of the homebuying equation that is often overlooked by buyers, especially first-time home buyers. Understanding how the LTT works, its calculation method, exemptions, and potential implications is vital to avoid surprises and make informed decisions in the purchasing process.

There are two types of LTT: one collected by the provincial government, and one collected on the municipal level. Currently, only the City of Toronto collects municipal LTT, but all properties in Ontario are subject to the provincial LTT, subject to certain exemptions. To calculate LTT for your particular situation, check out our Ontario Land Transfer Tax Calculator here.

The First-Time Home Buyer Land Transfer Tax Rebate

The Land Transfer Tax Rebate for first-time homebuyers is a government initiative designed to ease the financial burden on people stepping into the homeownership arena for the first time. This rebate essentially refunds a portion of the LTT paid by first-time buyers, up to a certain maximum amount. It's a significant aid that can save buyers thousands of dollars, money that can be redirected towards furnishing, renovations, or simply settling into their new home.

The exact amount you can save through this rebate is directly tied to the purchase price of your home. The maximum rebate amount available for first-time homebuyers in Ontario is $4,000. This cap means that homes purchased for $368,000 or more would be eligible for the maximum rebate, effectively removing the LTT for properties at that price point. For more expensive homes, the rebate covers a portion of the tax, providing a substantial financial relief.

Eligibility Criteria

First-time homebuyers may be eligible for a refund of up to $4,000 of the Ontario Land Transfer Tax. To qualify, you must:

• be at least 18 years of age, 

• have never owned a home before, 

• not be married to or in a common-law relationship with a current home-owner,

• occupy the property within 9 months of the closing date

• and be a Canadian citizen or permanent resident.

If you are purchasing the property with another person who is not a spouse or common-law partner, and that co-purchaser is not a first-time homebuyer, you will only receive a rebate proportionate to your ownership share.

Applying for the Rebate

Claiming the rebate is integrated into the home-buying process. Typically, your lawyer or real estate professional will apply for the rebate on your behalf as part of closing the transaction. At Doormat, this is something we’ve integrated into our closing process to ensure that the burden doesn’t fall to you. This inclusion means that the rebate can be applied directly to the Land Transfer Tax due at the time of purchase, reducing the amount you need to pay out of pocket. It's crucial to have all necessary documentation ready, including proof of property purchase and evidence that this is your first home, to ensure a smooth application process.

Common Questions and Concerns

By far, the most common question we get about the First-Time Home Buyer Land Transfer Tax Rebate is: "What if my partner isn't a first-timer?" In short, it depends. Are you married or living in common-law with your partner? Did you live together while your partner owned a property? The answers to these questions will help determine if you’re still eligible for the rebate. Your real estate lawyer will help navigate these questions to determine your eligibility.

If it’s determined that you’re still eligible, but your partner is not, the amount of your refund will depend on your ownership stake in the property. For example, if your purchase price is high enough that you are able to maximize the rebate and you will own 50% of the property, your provincial LTT rebate will be $2,000.

Other First-Time Home Buyer Benefits

The Land Transfer Tax Rebate is not the only first-time home buyer benefit. First-time home buyers in Ontario have access to a variety of benefits designed to make entering the real estate market more affordable and accessible - check out our blog for a deep dive into these. These benefits can significantly reduce the financial burden associated with purchasing a first home. Outside of the LTT rebate, these are the other benefits you should be aware of:

• Home Buyers’ Plan (HBP): This national program allows first-time homebuyers to withdraw up to $35,000 from their Registered Retirement Savings Plans (RRSPs) tax-free to put towards the purchase or construction of a qualifying home. If purchasing with a partner who is also a first-time homebuyer, each person can withdraw the same amount, doubling the potential down payment assistance to $70,000.

• First-Time Home Buyer’s Tax Credit (HBTC): This is a non-refundable tax credit based on an amount of $10,000 for first-time homebuyers of a qualifying home. It provides up to $1,500 in federal tax relief, designed to help with the costs associated with purchasing a home, such as legal fees and land transfer taxes.

• First Home Savings Account (FHSA): This is a tax-free home savings account where people who have not purchased a property before can accumulate up to $40,000 in savings to contribute towards their first purchase. The money in your FHSA can be used to purchase various investment products (eg. mutual funds, GICs, stocks, etc.).

• Municipal Land Transfer Tax Rebate: In addition to the provincial rebate, some municipalities in Ontario, like Toronto, offer their own LTT rebates for first-time homebuyers. In Toronto, for example, first-time homebuyers can receive a rebate up to $4,475 on the municipal land transfer tax.

These programs and incentives are designed to reduce the upfront costs associated with buying a home, making homeownership more accessible to first-time buyers in Ontario. It's essential for potential buyers to research and understand the criteria and application processes for these benefits to ensure they take full advantage of the support available.

Wrapping Up

The first-time homebuyer Land Transfer Tax Rebate is a valuable opportunity to reduce the financial burden of buying your first home in Ontario. By understanding and utilizing this rebate, along with other available resources, you’re not just buying a home; you’re making a smart financial decision.

Need More Information?

Embarking on your home-buying journey with a solid understanding of the Land Transfer Tax Rebate is crucial. For further assistance and to navigate the legal aspects of your home purchase confidently, don't hesitate to reach out to us for support. At Doormat, we provide real estate lawyer services for property purchases, sales, refinances, and ownership changes. Our experienced lawyers can help you navigate the nuance of the LTT rebate to ensure that you’re maximizing your claim, while still being on side with the rules and regulations set out by the government.