If you are one of the many people who are new to home buying, you probably have a lot of questions. One question that is frequently asked of agents and lawyers involved in a sale is regarding the Land Transfer Tax. If you find yourself in this position and are curious about the tax and how it effects you, here is an overview to help you to get familiarized with it.
Understanding land transfer tax
Generally speaking, when someone buys a parcel of land or interest in it, you typically have to pay a tax. Much like you need to pay tax on a new mouthpiece or dental services from your family dentist, you need to pay Land Transfer Tax. This is even the case if the property, itself, is not registered at an Ontario land registry office.
Many ask if "land" refers to a barren lot. Does it effect the house for sale that you and your family are looking at? Most provinces, such as Ontario, consider "land" to include any buildings, those standing or yet to be constructed, including all of the fixtures and chattel inside. This includes the property's wiring, lighting, fixtures, built-in appliances and cabinets.
If you are new to purchasing real estate, be sure to understand everything that you might face per taxation. Be sure to ask your lawyer and agent any questions that you might have and, further, exploring answers yourself. If you are about to make an offer on an expensive piece of real estate, you don't want to be caught unaware about the costs you will be incurring.
The amount of land transfer tax paid is based on the overall amount paid for the land combined with any amount remaining on mortgages or debts. Whether you are buying Thunder Bay or downtown Toronto real estate, the land transfer tax can also be influenced by the real, fair market value of your land.
In various scenarios, the land transfer tax can be based on the land's fair market value. Note that these details may differ if you ask a Toronto real estate lawyer versus an Edmonton real estate agent. However, in some cases, the tax is based on the land's value when the property's lease exceeds fifty years, has been transferred from a company to a shareholder of has been transferred to a company that has shareholders.
With some time and determination, you should have no challenges in understanding the terms and conditions of your land transfer tax. It may be as simple as asking your agent to help estimate what it will be. Be sure to keep the estimated amount in mind for when the time comes to arrange receipt of the title, deed or keys to your new property.