First-time home buyer? You may be eligible for a refund.
In our previous blog posts, we provided an overview of the basic expectations when purchasing a home. A major step in finalizing any home purchase is paying land transfer tax in respect of the property. There are, however, certain benefits provided to first-time homebuyers in Ontario to reduce the amount of land transfer tax payable. In our post today, we would discuss the land transfer tax refund and how first-time homebuyers can take advantage of the benefits under it.
What is the Land Transfer Tax?
Land transfer tax is the tax payable by Buyers whenever an interest in land is purchased, it is payable throughout the province to the government of Ontario, and if property is being purchased in the City of Toronto, there is a separate municipal land transfer tax payable to the City of Toronto. In determining how much would be paid as land transfer tax, various factors such as the purchase price and mortgage sum due, would be considered the consideration payable for the property. What is included in consideration is further explained here. It is therefore a welcome relief that first-term homebuyers are entitled to a refund of all or part of their land transfer tax, subject to eligibility.
Are you eligible for a land transfer tax refund?
To be eligible for a land transfer tax refund, a homebuyer must be at least 18 years of age and must not have owned any home anywhere in the world. Where the homeowner has a spouse, the spouse also must not have owned a home anywhere in the world, while he or she was a spouse, to be able to claim a refund.
Furthermore, the homebuyer must be a Canadian citizen or Permanent resident to be eligible, as stated by the Government of Ontario in this article. If a Buyer is not a Canadian Citizen or Permanent Resident, he or she can still apply for the tax refund within 18 months if they become a Canadian Citizen or Permanent Resident within that time.
In addition to these requirements, the homebuyer must occupy the property as their principal residence within nine months of the date of transfer.
How much is the refund?
The amount given as a refund depends on when the property purchase occurred. For purchases that occurred before January 1, 2017, the maximum amount of the refund is $2,000. However, for purchases done after January 1, 2017, the maximum amount of the refund is $4,000.
Is there a time limit to apply?
According to the Government of Ontario, an eligible homebuyer must apply for the refund within 18 months after the date of registration of the purchase of the property or the date the unregistered disposition occurs. More information can be found here.
How do you apply?
An eligible homebuyer can apply for the refund at the time of registration of the transfer in the electronic land registry system if eligible, or alternatively if a paper transfer has to be registered, then at the land registry office at the time the transfer is being delivered to the land registry office. The refund can also be claimed after the time of transfer, so long as its done within the time limits described above. For applications done at the time of registration, the purchaser would have to fill out the Ontario Land Transfer Tax Refund Affidavit For First‑Time Purchasers of Eligible Homes, and the Land Transfer Tax Affidavit along with the Transfer or Deed.
Where the application for refund is made after the property registration, the land transfer tax will be paid and thereafter, the eligible homebuyer can apply to the Ministry of Finance for the refund. There are certain documents that must be submitted along with this application and they are discussed extensively in this article.
If there are any questions about eligibility for the land transfer tax refund, kindly book a free consultation with Northview Law on this link, or contact us at 416-639-7639. We look forward to hearing from you soon.