We're sure you've heard the raging debate on the proposed new land transfer tax, whether reading about it in newspapers for the last few months or hearing snippets of discussion on the news. Well, despite the best efforts of the Toronto Real Estate Board and many other advocates, the new tax is now law. To eliminate any confusion surrounding the new tax, read on!
Who approved the new tax, at what level of government?
Toronto City Council has approved it. It is a municipal land transfer tax that will be levied on top of the provincial land transfer tax.
What exactly was approved by City Council?
A second land transfer tax, on top of the provincial land transfer tax, at the following rates:
Residential:
- 0.5% of the amount of the purchase price up to and including $55,000
-
1% of the amount of the purchase price between $55,000 and $400,000
-
2% of the amount of the purchase price above $400,000
So a home sold for $800,000 will carry an additional municipal land transfer tax of $16,000.
Commercial / Industrial / Etc.:
-
0.5% of the amount of the purchase price up to and including $55,000
-
1% of the amount of the purchase price between $55,000 and $400,000
-
1.5% of the amount between $400,000 and $40 million
-
1% of the amount above $40 million
When does this take effect?
February 1, 2008.
Is this retroactive?
No. Any transactions where the Agreement of Purchase and Sale was signed prior to December 31, 2007 will be rebated the full amount of the Toronto land transfer tax, regardless of the closing date. (Note: Media reports that closings must occur by Feb. 1, 2008 are inaccurate.) The City has not yet provided clarification on how rebates will be administered. If you are concerned about this, please check with your real estate lawyer. Once the City of Toronto provides clarification, more information will be provided.
What about Agreements of Purchase and Sale signed after December 31, 2007 with closing dates before February 1, 2008?
Purchasers with a Purchase and Sale agreement signed after December 31, 2007 with a closing before February 1, 2008 will not be required to pay the Toronto Land Transfer tax.
What about Agreements of Purchase and Sale signed after December 31, 2007 with closing dates on or after February 1, 2008?
Purchasers with a Purchase and Sale agreement signed after December 31, 2007 with a closing on or after February 1, 2008 will be required to pay the full Toronto Land Transfer tax.
Where does this apply?
The Toronto land transfer tax only applies to transactions within the City of Toronto. This does NOT apply to property transactions outside of the City of Toronto.
Are first time home buyers affected?
First time home buyers of new AND re-sale homes will receive a rebate of the Toronto land transfer tax of up to $3,725 (this equals a 100% rebate on homes purchased for up to $400,000 - first time home buyers essentially pay nothing on the first $400K). The City has not yet provided clarification on how rebates will be administered.
Should I panic?
Please don't panic :) If you are for sure going to buy a home, it makes sense to do so with a closing date prior to February 1, 2008. The bustling fall market ensures plenty of choice for buyers wishing to purchase a property now.
More detailed information will be provided once it is made available by the City. If you have questions, contact the City of Toronto at Access Toronto at 416-338-0338.