Understanding Land Transfer Tax When Making Property Title Changes
December 2, 2024 | Posted by: Sherry Corbitt
When it comes to whether you're adding or removing someone, land transfer tax can be a nuanced topic. While a typical property purchase or sale usually incurs land transfer tax when ownership changes, the rules can vary when it comes to specific situations like changing names on title.
Spouses
For spouses, it’s often possible to add or remove one another from title without triggering land transfer tax, provided the change is made for “natural love and affection” and involves no exchange of funds beyond assuming a mortgage. However, if one spouse is actually purchasing an interest in the property, land transfer tax will apply.
In Ontario, a 'spouse' includes:
- Those legally married
- Common-law partners who have either: Cohabited for at least three years, or are in a long-term relationship and share a child (biological or adopted)
Additionally, former spouses transferring property as part of a separation agreement can avoid land transfer tax, even if there’s financial compensation involved, as long as the agreement is documented in writing.
Family and Friends
When it comes to family members or friends, land transfer tax typically applies, especially if there’s a mortgage on the property or funds are being exchanged. However, there are some scenarios where this tax can be avoided:
- Gifted Property: If you’re transferring property to a family member or friend without a mortgage and as a pure gift, land transfer tax is not usually required, as the “consideration” (purchase price) is zero.
- Trust Scenarios: In cases where a parent is listed on the title as a trustee so their child can qualify for a mortgage, the transfer can often be completed without land transfer tax, as long as the trust relationship is documented.
For personalized guidance, be sure to share these details with your real estate lawyer, as each situation can vary.
First-Time Homebuyers
If you're purchasing your first home and need to pay land transfer tax, you might qualify for a rebate. This rebate is generally available if neither you nor your spouse has owned a home, and it’s important to review your eligibility with your real estate lawyer.
Additional Situations
The examples above cover some of the more common scenarios, but there are other exemptions as well, such as transfers involving family farmland, estate transfers, and more. It’s best to consult a lawyer or accountant about any additional taxes or unique circumstances you may need to consider.
Please reach out to me if you have any questions, I am always here to help with your mortgage needs!
Your Broker for Life,
Sherry Corbitt
