Real estate is a significant purchase, and there is often more to account for in terms of cost than simply the asking or agreed-upon price. These accessory buying costs may or may not include Ontario’s Harmonized Sales Tax (HST), depending on the circumstances.
However, the nuances of taxation on real estate (in Ontario) exceed the question “Do you pay HST on a house?” Beyond the scope of standard sales tax, buyers will face other expenses, and in certain cases, rebates and relief programs may apply.
In this article, we will address whether you pay sales tax on a house in Ontario, and other important considerations regarding buying and owning a home. Continue reading for critical insights.
Looking to break into the West Toronto market? Our team of industry insiders can help you reach your home-buying goals. Call us at 416.772.4723 or reach us by email at evan@christensengroup.ca.
Do You Pay Sales Tax on a House in Ontario?
In terms of sales tax application (HST), there are two primary types of home purchases in Ontario. The first is the purchase of an existing, resale home. The second categorization entails pre-construction or new build properties.
While both of these homes have their unique advantages and disadvantages, one of the primary distinctions between them is taxation upon purchase.
Is There HST on Resale Homes in Ontario?
In Ontario, HST does not apply to resale homes. Any residential property that has been previously lived in is considered to be a resale home and is therefore exempt from sales tax. However, as part of a home purchase, certain closing costs such as legal expenses, appraisal and/or inspection fees, may be subject to HST.
Searching for advice ahead of your home purchase? Consider these related readings.
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Is There HST on New Homes in Ontario?
Unlike resale properties, new build homes (including condominiums) in Ontario are subject to the standard 13% HST. Initially, this expense may sound substantial, however, rebate programs can offset a major portion or all of it.
How to Avoid HST on New Homes
Although bypassing HST on new build homes is not formally possible, a significant refund may be available as part of Canada’s new housing rebate, effectively offsetting the financial burden. Rebates are often overseen by builders and factored into a buyer’s final purchase price.
Land Transfer Tax
Although there is no designated sales tax or HST for resale homes in Ontario, buyers must still pay provincial and, depending on location, municipal land transfer taxes (LTT). This is a significant cost that must be accounted for in one’s home-buying budget.
Provincial land transfer tax is calculated on a sliding scale, factoring in the value of the property. Rather than applying a single rate to the final purchase price, LTT is assessed incrementally. Here’s is a helpful guideline for those wondering: “How much tax do you pay when you buy a house in Canada”:
- For amounts up to and including $55,000, the rate is 0.5%.
- For amounts exceeding $55,000, up to and including $250,000, the rate is 1.0%.
- For amounts exceeding $250,000, up to and including $400,000, the rate is 1.5%.
- For amounts exceeding $400,000, the rate is 2.0%.
- For amounts exceeding $2,000,000, where the land contains one or two single-family residences, the rate is 2.5%.
Land Transfer Tax on Upscale Homes
As of last year, the City of Toronto has updated their taxation rates for high-value properties, beginning at a $3,000,000 baseline. From there, municipal LTT rates are adjusted incrementally.
- Homes purchased for more than $3,000,000 – 3.5%
- More than $4,000,000 – 4.5%
- More than $5,000,000 – 5.5%
- More than $10,000,000 – 6.5%
- More than $20,000,000 – 7.5%
Searching for strategic guidance on buying a home? Consider these related readings for more insights.
- Buying Your First Home? Here’s What You Should Know
- How to Find the Best West Toronto Real Estate Team
- Can I Buy a Toronto Home if I Have Bad Credit?
Land Transfer Tax Rebates
While land transfer tax can be a significant expense, some relief is available for qualifying buyers, most of whom are Canadians who are purchasing a home for the first time.
In Ontario, eligible first time home buyers can apply for a rebate up to $4,000. Remember that this refund applies only to the provincial land transfer tax. However, additional municipal rebates are available to certain buyers in Toronto as well, up to a maximum of $4,475.
Who Qualifies For a Land Transfer Tax Refund in Toronto?
- Canadian citizens or permanent residents.
- The purchased home must be occupied within 9 months of the acquisition date.
- An applicant’s spouse must not have owned a home during their marriage to the applicant (prior homeownership by the spouse is permissible).
- For newly constructed homes, eligibility for a home warranty is required.
- Homebuyers are required to apply for the refund within 18 months of the purchase date.
Buy With Christensen Group
If you’re looking for clarity on how taxation may impact your real estate purchase, it’s best to speak to an expert. At Christensen Real Estate Group, we’ve been helping wealth-savvy homeowners build equity and protect their investments for more than four decades.
Whatever you’re looking to accomplish, our informed advisory services can give you an upper hand in one of the world’s most cutthroat housing markets.
Buying or selling in Toronto? Our strategic advisory services can help. Call us at 416-722-4723 or reach us by email at evan@christensengroup.ca.
