When a buyer considers purchasing a home in most areas of the country, they will have to allow for thepayment of a tax which is sometimes referred to as a property purchase tax, but more generally known as a land transfer tax. The value of this tax is generally calculated on a percentage of the residential property's sale price, and the precise formula for the calculation of the amount of tax payable varies considerably from region to region, and sometimes just from one neighbourhood to the next.
Total Land Transfer Taxes Can Exceed 3%!
In every case, these taxes are borne by the buyer of a residential property and depending on the location of the home can vary anywhere from around half a percentage point of the total purchase price of the property all the way to two percent. This tax is not to be taken lightly as in the higher taxed regions, it adds more than $10,000 in cash to the price of a $700,000 house. In Toronto there is an additional municipal version of this tax which can virtually double even that amount, so Torontonians would pay over $20,000 just in land transfer taxes on that same home (which is not that luxurious as there are many Toronto homes in that price range or well above). The fortunate residents of rural Nova Scotia, as well as all of Saskatchewan and Alberta, are free from the payment of this particular tax.
Know What Rebates You're Entitled To
There are a variety of rebates other schemes to keep this tax from overly depressing the demand for first time home purchases. Some of the restrictions of these rebates generally include:
- The buyer must be 18 years of age or older.
- The rebate application must be filed no more than 18 months after the effective date of the disposition or conveyance.
- The owner must have the residential property in question as their primary residence and not as a vacation or rental home.
- The owner must not have previously owned, or had any interest in the ownership of any residential property, whether in Canada or anywhere else in the world.
- The buyer's spouse must also not have had any ownership stake in any home anywhere during thetime that they were the spouse of the new owner.
There are virtually endless interpretations, conditions, and various other details involved in these rebates. For example, it is well nigh impossible to make an accurate determination of whether a particular individual has owned a home outside Canada before as many Third World nations do not keep accessible records of this type.
Always Have Professional Advisors Available
The complexity of the regulations and restrictions of the land transfer tax, as well as the propensity of provinces such as British Columbia, Manitoba, Ontario, and Quebec to place a sliding scale of application onto this tax according to the price of the property, is a clear indicator that any buyer who plunges into a real estate transaction without either ample experience or trusted, seasoned professionals as advisors, is likely to be unprepared for the costs and convolutions involved in closing the deal.