Land Transfer Tax in Ontario:

Who Pays, Who Doesn’t, and Who Gets Stuck with the Bill

By Mirjana (Mira) Markovic

Land Transfer Tax (“LTT”), Ontario’s way of making sure that when property changes hands, the government still receives a slice of the pie. However, here is the kicker: whether you pay it depends not only on the value of the property, but who’s on the other side of the deal. Sometimes, you are off the hook; sometimes you are not, and sometimes it depends on whether there’s a mortgage associated with the property.

Let us break it down by relationship category because when it comes to LLT, your family tree and friend circle really do matter.

Spouse to Spouse: True Love, No Tax (Usually)

Title transfers between spouses or common law spouses are generally exempt from LTT if:

a) no money changes hands;

b) no mortgage is being assumed.

For example, if you add your spouse to the title of your home, just because you want them to be close to you on title as they are close to you in person, then there is no LTT payable. Romance wins. However, if your spouse is buying your share at market value, then yes, Cupid cannot save you from paying LTT.

Separated or Divorced Spouses

This is a rare tax break in a break-up. The law actually cuts spouses who are separating some slack. A title transfer under a Separation Agreement or Divorce Settlement is LTT-free. For example, if a husband signs over his interest in the matrimonial home to his wife as part of their divorce, no LTT is payable.

Parent to Child: The Cottage Catch

A parent can transfer property to a child free of LTT only if it is a true gift, meaning no money exchanges hands and no mortgage assumption occurs. For example, if a mother gifts the family cottage with zero strings attached, no LTT is payable. However, if Junior takes over a $200,000.00 mortgage, then Junior will pay LTT on the said sum. Moral of the story: free cottages are not always free.

The same rules apply for transfers made between grandparents and grandchildren.

Friends to Friends

Sorry, there is no discount here. When it comes to friends, Ontario takes a cold, hard view: you are just two unrelated people making a deal. Which means…yes, full LTT is payable on the price or mortgage assumed. Unless your bestie is gifting you a house with no mortgage, you will pay LTT for such a transfer. Friendship may be priceless, but land in Ontario is not.

Estate to Beneficiaries

Here is some good news: when real estate passes from the Estate to Beneficiaries under a Will, no LTT is payable. For example, if a grandma leaves her condo to her granddaughter in her Will, the title transfer from the Estate to the granddaughter is free from LTT. However, if the Beneficiary buys out other heirs or takes on a mortgage as part of the transfer, then LTT will apply to that portion.

Inheritance itself is not taxed by LTT; the government waits until you sell it or shuffle it around, where money is involved.

Bonus Round: The Toronto Double Dip (MLTT)

If a property is located in Toronto, brace yourself: the City charges its own Municipal Land Transfer Tax (“MLTT”) on top of the Provincial LTT. Same rules and exemptions above apply, except you are paying both the Provincial LTT and Municipal LTT.

The Bottom Line:

• Transfers from spouses: LTT is not applicable unless there is money or debt involved.
• Transfers from separated spouses: They get a rare tax holiday.
• Transfers from parents and grandparents: They can gift freely, but a mortgage triggers tax.
• Transfers between Friends: Sorry, no favours, LTT applies.
• Transfers from the Estate to Beneficiaries: They are LTT-free, unless there is a buyout or debt assumption.
• Toronto Properties: Such properties are double the tax fun.

Conclusion:

The LTT in Ontario is one of those sneaky costs that can surprise people, but it does not have to. Whether you are adding your spouse, gifting a cottage to your children, or inheriting a condo from grandma, the golden rule is simple: If money or mortgage changes hands, expect the taxman. If it is a pure gift or inheritance, you may be in the clear.

On the other hand, if the property happens to sit in Toronto. Well, congratulations—you get to play the game twice with both the Provincial and Municipal taxes.

Thinking about transferring your property? The rules on paper may seem simple enough, but one wrong step can trigger thousands in land transfer tax. So, before you add someone to title, gift, or inherit, speak to your real estate lawyer to ensure that you keep more money in your pocket.

I hope that this article has provided you with some helpful information. If you have any questions, please do not hesitate to contact me directly at mira@sorbaralaw.com.