If you’re fortunate enough to buy a home in the city of Toronto, you’d likely experience higher closing costs, largely due to Toronto's Municipal Land Transfer Tax (MLTT).
This tax has been a point of discussion and contention among homebuyers and real estate professionals since its inception in 2008. It arrived as part of the City's efforts to generate additional revenue for infrastructure and services. According to the City of Toronto, the MLTT generates a little over half a billion dollars in revenues annually.
While Toronto may have been alone in their ability to charge an MLTT for the past 15 years, other municipalities are now chomping at the bit to also charge their own MLTT.
What is the Toronto Municipal Land Transfer Tax (MLTT)?
Toronto's Municipal Land Transfer Tax is a one-time tax that homebuyers must pay when they purchase a property. It is levied on top of Provincial Land Transfer Taxes, which essentially doubles the amount of land transfer tax owed on closing.
The MLTT has been a subject of controversy since its inception. Critics argue that it places an additional financial burden on homebuyers, making it even more challenging for individuals and families to enter the housing market. Proponents, on the other hand, argue that the revenue generated from the tax is essential for funding essential city services and infrastructure.
Changes to the 2024 Toronto Municipal Land Transfer Tax
For 2024, Toronto’s city council voted to increase the Municipal Land Transfer Tax even further, targeting buyers of luxury homes in the Greater Toronto Area. Currently, the MLTT is calculated as follows:
- Up to $55,000: 0.5%
- $55,000 - $400,000: 1.0%
- $400,000 - $2,000,000: 1.5%
- Over $2,000,000: 2.0%
For example, if you were purchasing a property for $3,500,000, your MLTT calculation would look like this:
- 0.5% on the first $55,000: $275
- 1.0% on the next $345,000 ($400,000 - $55,000): $3,450
- 1.5% on the remaining $200,000 ($3,500,000 - $400,000): $46,500
Total MLTT: $50,225. Remember, this would be on top of the Provincial Land Transfer Tax of $50,225, so altogether, $100,450 would be payable in Land Transfer Taxes on a $3.5M property!
Under the newly approved proposal, the following MLTT rates:
- a 3.5 per cent tax would be applied to homes valued at more than $3 million up to $4 million.
- A 4.5 per cent tax would be applied to homes valued at more than $4 million up to $5 million
- A 5.5 per cent tax to homes valued at more than $5 million up to $10 million
- A 6.5 per cent tax to homes valued at more than $10 million up to $20 million
- A 7.5 per cent tax would be applied to homes valued at more than $20 million.
So doing the math again, on a $3.5M property in the GTA, a homebuyer would be looking at an MLTT of $56.5K, or an extra $6,245. Treat yourself to a luxurious $5.295M property and you’re looking at a whopping $97,850 in additional MLTT. Now, you might argue that a buyer of a $5.3M home won’t flinch at an extra 100 grand, but no matter how you look at it, that’s a significant chunk of change, especially at today’s interest rates.