If you’re wondering how property taxes work in a pre-construction condo unit in Ontario, you’ve come to the right article.
Pre-construction buyers need to understand the GST/HST taxes that will be applied to the sale price of the unit as well as the land transfer tax associated with the building’s registration on closing. Let’s start there.
Land transfer taxes
If you’re a first-time homebuyer, you might be surprised by all the additional costs associated with getting the keys to your new place – from lawyer’s fees to all the miscellaneous costs, including taxes.
In Toronto, there are two different land transfer taxes the buyer must cover; one to the city and one to the province. The amount you pay will depend on the value of your home and its purchase price, calculated as a percentage.
For example, a unit costing $500,000 will run you $6,475 in Provincial Land Transfer Tax, and $6,475 in Toronto Land Transfer Tax. You can use TREB’s Land Transfer Tax calculator and input any sales price you like to get an estimate.
GST / HST rebates
The amount of tax you pay on the purchase of a pre-construction unit will depend on who is actually inhabiting the unit once it becomes liveable.
If your pre-construction home will be your primary residence, or that of your direct family member(s), you can qualify for a GST/HST rebate through the Canada Revenue Agency. You must apply for the New Home Rebate within one year of moving in. If you sell the unit within one year of moving in, you’ll have to pay back the total HST rebate.
If you’re instead intending to rent out the unit, you will be disqualified from the rebate and required to pay all of those government taxes, totalling up to $24,000 depending on the sale price.
You’ll be charged further property taxes on closing, for an estimate of the property taxes. Once the building is assessed by the city, you’ll be billed for any remaining amount owed to the builder or reimbursed if the initial estimate was too high.
As with any home, property taxes are ongoing and recurring. The value of your unit will be reassessed regularly every three years or so, after the first assessment a few months into ownership.
This means that any upgrades you’ve made to the unit over time will be noted to recalculate your property taxes. The higher value of your unit, the more taxes you can be expected to pay down the road.