Buying a home is an exciting process with many unexpected costs. Beyond your down payment, you’ll also be responsible for paying legal fees, appraisal costs, title transfer costs and taxes to the province or municipality (or both).
That last item is called a land transfer tax (LTT), except in the provinces of Alberta and Saskatechewan, which describe those costs as land transfer fees. Despite the differences in terminology, the idea is the same: the buyer pays a one-time tax to the local government every time a property changes hands.
What is a land transfer tax?
Most of the time, LTT is calculated as a percentage of the home’s sale price and is due when you complete your home purchase. It’s part of your closing costs, which means you’ll need the cash on hand to pay for it at closing.
You can use a land transfer tax calculator to estimate how much you’ll need to pay. Depending on your home’s value, LTT can easily cost thousands of dollars. The fees charged in Alberta and Saskatchewan are typically much smaller.
How is land transfer tax calculated?
Every province in Canada charges some form of tax on property transfers, and some municipalities charge an additional tax, known as municipal land transfer tax (MLTT).
Most provinces charge their tax as a percentage of the value of your home, and most tax rates are marginal, which means the size of the tax increases as the home’s value increases. You can look up how much you can expect to pay, depending on where in Canada your home is located, or use a land transfer tax calculator.
Alberta is one of the few provinces in Canada that does not charge LTT. Instead, it charges a transfer of land registration fee and a mortgage registration fee.
- The transfer of land registration fee covers the administrative cost of changing the legal title of the land. The buyer is charged $50 plus $2 for every $5,000 of the value of the property.
- The mortgage registration fee covers the issuance of the mortgage. The buyer is charged $50 plus $1.50 for every $5,000 of the principal mortgage amount.
When buying property in British Columbia, the amount of LTT is based on the value of the property. In B.C., buyers pay a marginal tax rate calculated as a percentage of the home’s value. The tax rates are:
- 1% on the first $200,000
- 2% on the portion from $200,001 to $2,000,000
- 3% on the portion from $2,000,001 to $3,000,000
- 5% on any amount over $3,000,000
When buying a home in Manitoba, the LTT is based on the home’s value. Buyers also pay a flat registration fee. The marginal tax rates in Manitoba are: