Land Transfer Tax on Inherited Property Ontario: Everything You Need to Know 2022
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Land transfer tax on Inherited Property Ontario, is tax charged when the property is transferred from one owner to another. The amount of tax payable depends on the value of the transferred property.
Land transfer tax on Inherited Property Ontario is charged on purchasing all properties, including inherited properties.
If you are inheriting a property in Ontario, you must pay a land transfer tax on the property’s value.
The amount of tax you are required to pay can vary depending on several factors, including the property’s value, your relationship to the deceased, and whether or not you are living in the property. This blog post will explore everything you need to know about land transfer tax on inherited properties in Ontario.
We will discuss who is required to pay the tax, how the tax is calculated, and provide some tips on reducing the amount of tax you will be required to pay.
Keep reading to find out more on Land transfer tax on Inherited Property Ontario.
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What is a Land Transfer Tax?
In Ontario, the Land Transfer Tax (LTT) is a tax levied on transferring ownership of certain property types. The tax is calculated as a percentage of the purchase property’s purchase price paid by the buyer at the closing time.
The LTT generally applies to all transfers of ownership of real property in Ontario. This includes transfers of land, buildings, and specific interests in land (such as leases and easements). In some cases, the LTT may also apply to transfers of personal property associated with real property in Ontario (such as fixtures and chattels).
Both the provincial and municipal governments impose the LTT. The local government sets a tax rate of 0.5% on the first $55,000 purchase price and 1% on any portion above $55,000. The municipal government imposes tax rates ranging from 0.5% to 2%. Therefore, the total LTT payable is the sum of the local and municipal tax rates.
For most people, the LTT is a one-time expense. However, there are some situations where the tax may be payable more than once.
For example, if you purchase a property and then later sell it or transfer it to someone else, you will be required to pay the LTT again on the new transaction.
When it comes to Land transfer tax on Inherited Property Ontario, there is more to it then we think, find out more below.
Who Pays Land Transfer Tax in Ontario?
Land transfer tax on Inherited Property Ontario is different.
In Ontario, the land transfer tax is paid by the purchaser on the total value of the property.
The amount due is based on a sliding scale as follows:
0.5% on the first $55,000
1.0% on the portion from $55,000 to $250,000
1.5% on the amount from $250,000 to $400,000
2.0% on any amount above $400,001
But what system is in place for Land transfer tax on Inherited Property Ontario?
Well, in Canada, the fair market value change on the sale of an inherited primary residence is taxed at 50%!
First-time homebuyers in Ontario may be eligible for a rebate of up to $4,000 land transfer tax, depending on the purchase price of their home.
How Much is the Land transfer tax on Inherited Property Ontario?
The Land transfer tax on Inherited Property Ontario usually when a primary house is sold, the fair market value change is used and taxed at a rate of 50%. The regular capital gains regulations apply to later sales of second properties, such as holiday homes, because they are taxed at the full capital gain rate when they are inherited.
The Land Transfer Tax in Ontario is based on the transferred property’s value. The tax is calculated as follows:
-0.5% on the first $55,000
-1.0% on the portion of the value between $55,000 and $250,000
-1.5% on the portion of the value between $250,000 and $400,000
-2.0% on any remaining value over $400,000
For example, if you are transferring property with a value of $300,000, your Land Transfer Tax would be calculated as follows:
-0.5% on the first $55,000 = $275
-1.0% on the next $195,000 = $1,950
Total Land Transfer Tax payable = $2,225
When is the Land Transfer Tax Paid in Ontario?
In Ontario, the land transfer tax is paid when a property is purchased or transferred. The tax is based on the value of the property and is calculated as follows:
-0.5% on the first $55,000
-1.0% on the next $55,000
-1.5% on the next $205,000
-2.0% of the remaining value over $315,000
For example, if a property is purchased for $400,000, the land transfer tax would be calculated as follows:
-0.5% of $55,000 = $275
-1.0% of $55,000 = $550
-1.5% of $205,000 = $3,075
-2.0% of $40,000 = $800
The total land transfer tax would be $4,700.
Depending on the market, and property value the Land transfer tax on Inherited Property Ontario can vary!
Exemptions to the Land Transfer Tax in Ontario
In Ontario, the Land Transfer Tax is payable on purchasing any land or interest in land. However, there are a few exemptions to this tax:
- First-time homebuyers may be eligible for a refund of up to $4,000 of the Land Transfer Tax. To qualify, the home must be your principal residence, and you must be a Canadian citizen or permanent resident.
- If you are purchasing a farm property, you may be eligible for a Farm Property Rebate of up to $5,000. The property must be at least 5 acres in size and used primarily for agricultural purposes to qualify.
- If you are purchasing a property that will be used as your primary residence, you may be exempt from paying the tax on the first $368,000 of the purchase price. This exemption is available regardless of whether you are a first-time homebuyer.
Conclusion
If you’re planning on inheriting property in Ontario, it’s essential to be aware of the Land transfer tax on Inherited Property Ontario that may be applicable.
The amount of tax you’ll have to pay will depend on the value of the property and your relationship with the deceased, but it’s essential to budget for this expense in advance. With a bit of planning, you can minimize the impact of the Land transfer tax on Inherited Property Ontario and ensure that you can be satisfied with the results of your inheritance.
Phone: 289-816-CYPR (2977)
Fax: 289-312-CYPR (2977)
Office: 755 Queensway East, Suite 202, Mississauga, ON
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