First Time Homebuyers! You’re Eligible For Tax BreaksBy SFreedman
FIRST TIME HOMEBUYERS:
Did you know that if you are a first-time homebuyer you might be eligible for tax breaks to save you money? The “first-time homebuyer refund” on land transfer tax (“LTT”) is offered by the Province of Ontario. Those purchasing in Toronto may be eligible for both the provincial refund as well as a separate refund through the municipality. This refund is available in order to help prospective homeowners make that first “big purchase”. The refund varies in amount and depends on your purchase price.
To qualify for the rebate typically you must:
- be at least 18 years of age;
- occupy the home as your principal residence within nine months of the date you became the owner; and
- have not owned property anywhere in the world.
There are certain limitations if you are married or common law and your spouse has owned property previously. Primarily, that they must have sold the property prior to becoming your spouse. Click here for more information.
For those who are purchasing a home within Toronto, the maximum refund is $5,725.00, while outside of Toronto, the maximum refund is $2,000.00. The value of the refund is based on the amount of LTT due on your purchase, so if the amount payable for your provincial LTT is $2000 or greater you will receive the maximum refund.
Here is an example:
|Cost of Home||Total Provincial LTT Due||Provincial LTT Rebate Amount||Total Municipal LTT Due||Municipal LTT Rebate Amount|
|Total LTT Due:|
If your purchase price is $500,000.00 then your provincial LTT payable is $6,475.00. However, with the provincial LTT refund, $2,000.00 is deducted from the total LTT payable and only $4,475.00 is payable. If we use the same example in Toronto you would still have to pay the remaining $4,475.00 in provincial LTT. However, you would also receive a municipal rebate of $3,725.00 off of the municipal LTT of $5,725.00 due, for a remaining amount payable of $2,000.00.
The total combined amount payable to the government after the provincial and Toronto LTT refunds would be $6,475.00.
Want to calculate the land transfer tax owing on your purchase? Use our land transfer tax calculator.
You are probably wondering when you receive this refund money. Well, the short answer is that although it is called a “refund”, if you notify your real estate lawyer that you are a first-time homebuyer then the refund amount is deducted on the closing date, meaning that the refunded portion of taxes are not payable to the government.
This is just a short summary of the LTT refund and you should be sure to discuss your individual situation with your real estate lawyer. The Kormans LLP legal team is ready to assist you with your real estate transaction!