First-time homebuyer tax break in ON: what it means for you
Right now, in Ontario, first-time homebuyers are eligible to receive a refund on the land transfer tax. The refund, in its current incarnation, is good for up to $2000. Anyone owing a payment of $2000 or less is effectively exemption from the tax, so long as they meet the necessary criteria.
Who is eligible for the tax break
So who is eligible to receive the rebate? Anyone that meets the following criteria.
- The home that is purchased is within Ontario
- The home is classified as a house, semi-detached, townhouse, mobile, condominium or apartment
- The home is occupied by the owner(s) within one year of purchase
- You have not owned a home at any point during the previous four years
- You have not lived with a spouse who owned your home within the previous four years
- Either you are your partner make the purchase on the qualified home
If each of these conditions is satisfied, you will receive the land transfer tax break.
What if you rent?
If you rent instead of own, you are not directly eligible for the tax break. However, the Ontario government has made an effort to aid renters as well as homeowners by reducing the taxes on rental buildings, which tend to be more burdensome than individual properties.
By reducing the cost of taxes for landlords the government is hoping to keep the cost of renting down. Of course, this does not actually requirelandlords to keep rent costs down. It merely lessens the necessity of raising rent.
How much does the tax break cover?
Under current Ontario land transfer laws, the tax rate fluctuates based on the price of the home. A home costing $100 000, for instance, has a lower tax rate than a home that costs $400 000. The rates, as outlined by Money Sense, look like this:
Home Purchase Price | Tax Rate |
Up to $55 000 | 0.5 percent |
$55 000 - $250 000 | 1.0 percent |
$250 000 - $400 000 | 1.5 percent |
$400 000 - $2 Million | 2.0 percent |
$2 Millions and above | 2.5 percent |
So a $200 000 home comes with a 1 percent property transfer tax, which totals $2000. The first-time homebuyer tax break brings that down to $0.
A home that costs $300 000 comes with a tax of 1.5 percent, which totals $4500. Under the current tax rules, the cost would therefore total $2500 fter the break.
Changes coming in 2017
If this is the first you’re hearing about the first-time homeowner transfer tax break, then here is some additional good news. In 2017, the break gets even better.
Next year the maximum refund will increase to $4000. That means any land transfer tax payment of up to $4000 effectively costs $0. For any payment exceeding $4000, you can simply subtract $4000, and you are left with the sum that is owing.
Under the new refund regulations, the same qualifications rules will apply. The monetary sum eligible to be refunded has simply been increased.