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If you decide to purchase a property, in Canada, you will be required to pay a tax to the Ministry of Revenue/Finance, in the province where you are buying.

This tax is commonly referred to as the “Land Transfer Tax” or the “Property Transfer Tax”.

The tax is usually paid to the Ministry of Revenue, within the Province and the tax is calculated based on the fair market value of the property, using a certain formula.  The formula used to calculate the land transfer tax portion varies greatly from province to province.  I used Ontario’s formula, as an example.  Here is how the Land Transfer Tax is calculated for a property purchased in Ontario:

The first $55,000 is taxed at 0.5%

The next $195,000 is taxed at 1%

The next $150,000 is taxed at 1.5%

And the remaining $250,000 is taxed at 2%.

So if you purchased a home for $300,000 in Ontario, your Land Transfer Taxes payable would be calculated as follows:

The first $55,000 is taxed at 0.5% or 0.005 * $55,000 = $275

The next $195,000 is taxed at 1% or 0.01% * $195,000 = $1,950

The next $150,000 is taxed at 1.5% or 0.015 * $50,000 = $750

And the remaining $250,000 is taxed at 2% or 0.02 * $0 = $0

The total Land Transfer tax payable is:   $275 + $1,950 + $750 = $2,975

If you decide to purchase a property in Ontario, and within the City of Toronto, you will be required to pay an additional tax, called the Toronto Municipal Land Transfer Tax and this is calculated as follows:

The first $55,000 is taxed at 0.5%

The next $345,000 is taxed at 1%

And 2% on the entire portion over $400,000.

So using the above formula, a home valued at $300,000 will result in an additional tax of:

The first $55,000 is taxed at 0.5% or 0.005 * $55,000 = $275

The next $345,000 is taxed at 1% or 0.01% * $245,000 = $2,450

And 2% on the entire portion over $400,000 is taxed at 0.02 * $0 = $0

The total Toronto Municipal Land Transfer Tax payable is:   $275 + $2,450 = $2,725

Land Transfer tax payable $2,975 + Toronto Municipal Land Transfer Tax payable is $2,725 = $5,700 !!

I decided to do some research to just compare all of the provinces and territories to see which provinces/territories had the highest and which provinces/territories had the lowest land transfer taxes.

The table below is based on a $300,000 purchase price and the data was collected as of July 31, 2010.

I was very surprised (well actually not) that the results show Ontario (Toronto buyers) are paying the HIGHEST land transfer taxes, compared to any other city in the country!!

Information gathered as of July 31, 2010.  This information is not guaranteed and therefore should not be relied upon without verification.  E.&O.E.  * Those who purchase in the City of Toronto, are also required to pay the Toronto Municipal Land Transfer Tax

This article written by Elizabeth Blair on July 31, 2010.  Elizabeth is a Licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario.  Elizabeth services mortgage clients in Mississauga and all over the Greater Toronto area.

You can contact Elizabeth directly by phone at (905) 510-5785

by email at eblair@mortgageedge.ca

or you visit any of her active websites at:

http://www.missmortgage.ca

http://www.burlington-mortgage.ca

http://www.oakville-mortgage.com

http://www.streetsville-mortgage.ca

Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) www.imba.ca

Lic # M08005880 / Brokerage Lic # 10680

Head office is located at:  15 Wertheim Court, Suite 210, Richmond Hill, Ontario, Canada.