The journey of owning a home is very thrilling but it also brings a share of financial responsibilities such as the land transfer tax. Luckily, if you’re a first-time homebuyer in Ontario, there’s a silver lining: a chance to receive a refund on that very tax. This refund isn’t just about saving money, it’s about opening doors to a more attainable dream of homeownership.  

In this blog, we’ll explore the eligibility criteria, refund amounts, limitations, and procedures for claiming the tax rebates for first-time homebuyers in Ontario. 

 

What is a Land Tax Rebate? 

Before we dive in, you may have been confused about what a land transfer tax rebate is all about. When buying a new home, it is required that you pay a land transfer tax, which is a fee based on the price of the property you’re buying. A land transfer tax rebate is simply the reimbursement or refund on a portion of the land transfer tax that you initially paid when buying your new home. It’s a way to give a little financial relief to first-time buyers. 

 

Who Qualifies for the Refund? 

To qualify for the land transfer tax refund as a first-time homebuyer in Ontario, here are some of the specific criteria you must meet: 

Age Requirement:  

If you’re a first-time homebuyer in Ontario, you must be at least 18 years old to qualify for the land transfer tax refund. 

Status of Homeownership:  

As a new homeowner, you’ll enjoy first-time homebuyer benefits. However, if you’ve already ventured into homeownership territory, this refund might not be on the table. 

Eligible Homes:  

The method of acquiring a home, whether through purchase, gift, or inheritance, does not affect eligibility for the refund. This means that both newly constructed and resale homes are eligible for the land transfer tax refund for first-time homebuyers in Ontario. 

 

Immediate Refunds and Registration 

First-time homebuyers have the option to claim an immediate refund at the time of registration. If registering electronically, you can complete the necessary statements under the Explanation tab of the electronic land transfer tax affidavit.  

For paper registrations, you can file an Ontario Land Transfer Tax Refund Affidavit for First-Time Purchasers of Eligible Homes form at the Land Registry Office. 

Claiming the refund at registration allows it to offset the land transfer tax payable. The tax must be paid if not claimed during registration, and a refund application can be submitted to the Ministry of Finance. Be warned that no interest is paid on this refund.

 

Refund Amounts and Limitations 

The refund amounts vary based on the date of the conveyance or disposition: 

Before January 1, 2017: The maximum refund was $2,000. 

On or after January 1, 2017: The maximum refund is $4,000. 

 As of January 1, 2017, first-time homebuyers pay no land transfer tax on the first $368,000 of the value of eligible homes. For homes valued above $368,000, the maximum refund is $4,000. 

 

Limitations and Examples 

To determine the refund amount, it is important to consider the percentage of home interest obtained by eligible purchasers. For example: 

Co-Ownership between Parent and Child:  

If you, as an experienced homeowner and parent, choose to collaborate with your first-time homebuyer child on a home purchase, here’s some great news: your child may be eligible to claim a whopping 50% refund on the land transfer tax. 

Joint ownership between Spouses:  

If one spouse is a first-time homebuyer, and the other spouse has owned a home before becoming their spouse, the first-time homebuyer may claim a refund proportionate to the spouse’s interest. 

 

Additional Requirements 

As of January 1, 2017, the first-time homebuyers’ refund program is limited to Canadian citizens and permanent residents of Canada. Purchasers who entered into purchase and sale agreements on or before November 14, 2016, remain eligible regardless of citizenship or residency status. 

 

Time Limit to Apply for Refund 

As a qualifying purchaser it is important to note that there is a time limit to apply for a land tax rebate. You must apply for the refund within 18 months after the conveyance registration date or the unregistered disposition. If you miss this deadline, you unfortunately won’t be able to claim the refund. 

 

Audit and Penalties 

Applications and refund payments are subject to audit by the Ministry of Finance. Obtaining or attempting to obtain a refund through deceit, falsehood, or fraud may lead to charges and fines, with a maximum fine of $4,000 upon conviction. Typically, your lawyer handles these details on your behalf, but we recommend staying in the loop about the details to shed light on why that rebate might be in question. 

 

The Bottom line 

The land transfer tax refund for first-time homebuyers in Ontario is an excellent opportunity to reduce the financial burden of purchasing a home. As a First-time homebuyer, you can take advantage of this program and reap the benefits of homeownership.  

 Whether you’re claiming the refund immediately at registration or applying for it later, it’s important to follow the guidelines and apply within the specified time frame.  

Interested in learning more about land transfer tax refund as a first-time homebuyer in Ontario?  Talk to a qualified real estate professional at Hombek Saint Aubyn Hill for personalized advice and assistance throughout the process. Happy house hunting!