Muskoka cottage closing costs and land transfer tax

The short answer

Ontario land transfer tax is charged on the price in brackets. Each slice of the price is taxed at the rate for its bracket and the slices are added together. On a round example price of $900,000 the provincial tax comes to $14,475. A first-time buyer who qualifies can claim a refund of up to $4,000, which would lower the net tax.

This is general information. A real estate lawyer calculates the tax on closing and confirms any refund.

The provincial rates

Ontario states these rates for agreements entered into after November 14, 2016, with registration or disposition on or after January 1, 2017:

• 0.5% up to and including $55,000
• 1.0% over $55,000 up to and including $250,000
• 1.5% over $250,000 up to and including $400,000
• 2.0% over $400,000
• 2.5% over $2,000,000 where the land has one or two single family residences

A worked example at $900,000

The price below is a round example. It is not a Muskoka sale price or a figure for any property.

1. The first $55,000 at 0.5%: $275
2. The next $195,000, from $55,000 to $250,000, at 1.0%: $1,950
3. The next $150,000, from $250,000 to $400,000, at 1.5%: $2,250
4. The remaining $500,000, from $400,000 to $900,000, at 2.0%: $10,000

Adding the four amounts gives $275 plus $1,950 plus $2,250 plus $10,000, which equals $14,475.

The 2.5% bracket does not apply here because the example price is under $2,000,000. If a first-time buyer qualified for the maximum refund of $4,000, the tax after the refund in this example would be $10,475. The refund is a maximum, so the actual figure depends on what the buyer is eligible for. You can try other prices with the land transfer tax calculator.

The first-time buyer refund

Ontario states that the maximum amount of the refund is $4,000, for conveyances on or after January 1, 2017. The eligibility rules stated on the same page are:

• the purchaser is at least 18
• the purchaser lives in the home as a main residence within nine months
• neither the purchaser nor the purchaser’s spouse has owned an eligible home or an interest in one anywhere in the world
• for agreements signed after November 14, 2016, the refund is restricted to Canadian citizens and permanent residents

A claim for a refund must be made within 18 months after the date of registration of the conveyance. Your lawyer normally handles the claim at closing and the first-time buyer guide on this site covers the wider process at Muskoka First Time Home Buyer Guide.

A cottage purchase raises a question the page does not settle: the refund asks that the buyer live in the home as a main residence. If the property is a seasonal cottage, confirm with your lawyer whether the refund can apply.

Toronto’s own tax

The Ontario page states that a buyer in the City of Toronto may also pay the City’s own municipal land transfer tax. The page names Toronto and does not say “only” and the pages checked did not state a municipal land transfer tax anywhere else. If you live in Toronto and are buying in Muskoka, the municipal tax is a question about the location of the property you buy and your lawyer can confirm it.

Other closing costs that exist

The list below says which costs exist. Amounts are not stated here because the research did not find a source for them. Ask your lawyer for a statement of adjustments and a cost estimate.

• Provincial land transfer tax, worked out above
• Legal fees and disbursements
• Property tax and utility adjustments between buyer and seller on the closing date
• Title insurance, if you choose it
• Survey costs, where a survey is needed or updated
• Survey and plan costs, if you apply to purchase a Crown shoreline reserve next to a waterfront lot
• Septic or building permit fees, if work follows the purchase

For a waterfront property two of these deserve a conversation early. A Crown shoreline reserve purchase is priced at the administrative fee or market value, whichever is greater and the applicant pays the survey and plan costs, as Ontario’s policy PL 4.11.03 states. Septic permit fees vary by municipality. Bracebridge, for example, lists a septic permit application fee of $450 or $200 if only a tank is being replaced, with the effective date of that fee not stated.

Timing of the payments

The tax is a closing cost, so it is paid through the lawyer on the closing date along with the balance of the price. Ask your lawyer for the figure before closing day so you know what to bring. Any refund claim is separate and has its own deadline, the 18 months after registration noted above. Keep a copy of the claim and the registration date.

Questions to ask your lawyer

• What is the land transfer tax at my price and does the 2.5% bracket apply?
• Do I qualify for the first-time buyer refund and will it be claimed on closing?
• What adjustments will be on the statement for property tax and utilities?
• Does this property have a survey and is a new one needed?
• Is there a shoreline reserve or road allowance that affects the title?
• What will I be asked to pay on closing day and when?

Ask Kirby for a plain list of the steps between an accepted offer and the keys. The first-time home buyers guide and the mortgage calculator cover the planning side and the buyers page explains how to start. Your lawyer confirms the figures.