As Toronto’s unique market faces greater strain related to supply and demand, the City has made certain adjustments to how real estate is taxed – with further changes potentially on the way.
However, these changes do not impact all Torontonians equally. Rather, these developments directly target affluent residents, which has led many to refer to these initiatives as a ‘wealth tax’.
So what should you know about the wealth tax? Keep reading for in-depth information.
Want to protect your wealth? Our strategic advisory services can help you achieve a lucrative sale or investment. Call us at 416.441.2888 or reach us by email at evan@christensengroup.ca.
What is a Real Estate Wealth Tax?
Before delving into the core considerations of this topic it’s important to address the nuances of what is (or qualifies as) a real estate wealth tax.
While real estate ‘wealth taxes’ have received ample coverage from various media outlets, the term has been used in a diverse range of contexts – creating opportunities for confusion or miscommunication. In broad strokes, a real estate wealth tax can refer to any type of taxation applied to real estate that directly or exclusively targets high-income buyers or property owners.
Accounting for this relatively broad definition, this post will address a few of the most discussed real estate wealth taxes and how they may impact buyers, sellers, and investors in Toronto.
Speculation vs. Impact
It’s imperative to recognize that a number of conversations around new real estate taxation in Toronto are (for now) speculative. While adjustments to certain measures have recently taken effect such as the changes to Municipal Land Transfer Tax rates on higher value properties, other proposals such as the previously-mentioned gentrification tax or property tax increases are merely that – proposals.
With this in mind, predicting how these types of taxes may impact you can be somewhat difficult and potentially unnecessary.
Looking to optimize the sale of your Toronto home? Explore these blog posts for strategic insights.
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Updates to Toronto’s MLTT
One considered ‘wealth tax’ that has already impacted affluent homeowners in Toronto is the recently applied revisions to the City’s Municipal Land Transfer Tax (MLTT) rates. Taking effect on January 1st, 2024, buyers purchasing upmarket properties are now subject to new MLTT rates based on the purchasing price of the home. So who is impacted?
Beginning with properties purchased at or valued beyond $3,000,000, MLTT 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%
Given the high baseline point, the implications of these new taxation rates will be somewhat limited. However, buyers seeking a home north of the 3 million dollar mark should account for these inflated rates ahead of their purchase.
Proposed Property Tax Increases
In addition to the amended MLTT structure, recently proposed changes to municipal property taxes have also donned the ‘wealth tax’ title. However, where this increase differs from the MLTT is that it will impact all homeowners in Toronto regardless of the determined value of their property.
As of January 31, City Hall is currently debating the implementation of a 9.5% increase to municipal property taxes.
Some analysts have suggested that the City is implying that anyone who is capable of owning a property in Toronto (given the market’s notoriety for high costs) should be able to take on this cost hike without issue. Or, in other words, if you are wealthy enough to own a home, you are wealthy enough for additional taxation.
Explore these related posts for more insights about the importance of being selective with the agent you work with.
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Protecting Your Investment
If you’re looking for clarity on how a wealth tax may impact your real estate goals, 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 real estate markets.
Looking to optimize your home’s market performance? Our strategic advisory services can help you achieve a smooth and lucrative sale. Call us at 416.441.2888 or reach us by email at evan@christensengroup.ca.
