In Ontario, purchases of land are subject to a provincial land transfer tax (and in some cases, an additional municipal land transfer tax). In an effort to keep housing at an affordable level, the Ontario government has provided a tax refund to first-time homebuyers.

This post serves as an overview of Ontario’s first-time homebuyer refund regime. It is for informational purposes only and should not be considered legal advice. If you have any questions related to land transfer tax, contact Chris Chu Law directly.

Who is Eligible?

In order to qualify for a first-time homebuyer refund, a purchaser must be:

  • At least 18 years old.
  • A Canadian citizen or permanent resident.
  • Occupy the property as their principal residence within 9 months of the date of transfer.

In addition to these basic requirements, a purchaser must not have owned a home or an interest in a home anywhere in the world.  The method of acquiring a home (i.e.,- purchase, gift, inheritance) is not relevant.

Example 1:

Jay is a Canadian permanent resident and studies at Ryerson.  His parents gifted him a home in Hong Kong several years ago. Jay is purchasing a condo in Liberty Village and has never owned property in Canada.  Jay is NOT entitled to any tax refund. 

Another issue for eligibility of this tax refund relies on a purchaser’s spouse.  A purchaser’s spouse cannot have owned a home anywhere in the world while they were the purchaser’s spouse.  If this is the case, no refund is available to either spouse.

Example 2:

Sarah is a Canadian citizen.  She is married to Brian, a Canadian permanent resident.  Both Sarah and Brian are purchasing a home together in Rosedale. Prior to their marriage, Brian had purchased a condo on King Street West and currently still holds the property. Sarah has never owned a property before. Sarah and Brian are not eligible for a first-time homebuyer refund.

What Are the Refund Amounts?

No land transfer tax is payable for first-time homebuyer purchases on the first $368,000.00 of the purchase price.  First-time homebuyers with a purchase price greater than $368,000.00 receive a maximum refund of $4,000.00.

Homebuyers eligible for a tax refund may claim an immediate refund at the time of registration and may offset the land transfer tax that would be payable.

Troubleshooting

While the tax refund seems fairly straightforward at first glance, the difficulty of determining whether a purchaser qualifies for this refund appears when there is more than one purchaser involved in a given transaction.

If two purchasers are not spouses, the refund will be reduced if one or more of the purchasers is not a first-time homebuyer.  The refund will be proportionate to the interest acquired by the individual who qualifies for the refund.

The most common example of this is when a parent and child purchase a home together.  In most cases, the parent has owned a home and is assisting their child in financing their first home.

Example 3:

Jeremy is a first-time homebuyer and is purchasing a condo unit in Leslieville. Jeremy’s mother, Anna, has decided to help finance Jeremy’s purchase and will be added on to the condo unit’s title. Anna owns a home in Scarborough. 

Assuming that Jeremy and Anna are purchasing the condo unit in equal shares (50/50), Jeremy can claim 50% of the land transfer tax refund that cannot exceed 50% of the maximum allowable refund amount of $4,000.00 (50% of $4,000.00). 

A Lawyer’s Role

Navigating through whether a purchaser is eligible or not can be a complicated task.  Oftentimes, purchasers will scour online resources, such as land transfer tax calculators, or speak with their real estate agents to obtain information on their tax position.

Despite the vast amount of information available to prospective home buyers, a lawyer is usually the best source of information with regards to a purchaser’s land transfer tax position. A good lawyer will conduct a thorough consultation with their client on their financing circumstances and their history of home ownership to advise them on any land transfer tax refund availability.  A trusted legal adviser will also possess industry-leading software to pinpoint the exact amount of tax payable in a given real estate purchase.

Disclaimer: Information made available on this website in any form is for information purposes only. It is not, nor is it intended to replace, legal advice. Contact Chris Chu Law to discuss a specific legal issue and please note that contacting Chris Chu Law, on its own, does not create a lawyer-client relationship.