With the onset of slightly higher mortgage rates, the province introduced a tax refund to increase affordability for first-time home buyers. The government announced that the first-time home buyers’ maximum Land Transfer Tax refund will be doubled to $4,000 as of January 1, 2017.
This means that eligible buyers will not be paying Land Transfer Tax (LTT) on the first $368,000 of their home’s purchase price. With this new refund amount, more than 50 per cent of first-time home buyers in Ontario will pay zero LTT on the purchase of their new home. This change is most beneficial for those buying homes under the $400,000 price point.
Land Transfer Tax Rates
Land Transfer Tax rates have remained the same since 1989. The new modernized rates are updated to include a rate for homes $2 million and over – rates for these homes will be 2.5%. Back in 1989, a $400,000 home was considered the benchmark of a luxury property – times have most definitely changed!
Will the Rebate Make a Difference?
There is much discussion about millennials and the difficulty they face in realizing the Canadian dream of home ownership. Market experts say that $4,000 is pocket change and not significant enough to have much effect on a home buyer’s purchasing decision. Tim Hudak, the incoming CEO of the Ontario Real Estate Association, on the other hand, is satisfied with the change and says the tax refund will help ease the upfront costs of buying a home.
Along With this Tax Refund, There are Other Rebates Already Available to First-Time Home Buyers in Ontario:
Home Buyer’s Plan – Buyers have the opportunity to use their RRSP contribution towards a down payment on their first home. You can withdraw up to $25,000 from any RRSP account. If two people are buying their first home together – the total contribution can be $50,000.
First-Time Home Buyer’s Tax Credit – If you have not owned a home within the last four years, you may be eligible for the first-time home buyer’s tax credit. The credit is based on $5,000 multiplied by the lowest income tax rate for that year. For example, in 2014 the rate was 15%, making the value of the credit $750.
New Housing Rebate – If you are buying a new house, you may be eligible for an HST tax rebate through the federal government. The program is designed to help with the federal portion of the HST. Applications for this rebate can be found on the Service Canada website.
If you are a first-time home buyer and are hoping to take advantage of all the rebates and incentives available, feel free to e-mail me at firstname.lastname@example.org or call 416 -921-1112, I can provide you with helpful resources and get you on your way.