Congratulations! You just bought a home. After years of careful planning, you’ve saved enough for a downpayment and qualified for a mortgage. You worked with an agent to negotiate a suitable purchase price, and everyone shakes hands. In exchange for your largest financial outlay of your life, you’re a proud homeowner. It’s exciting. You celebrate. And then various levels of government politely clear their throats.
How does the saying go? Death and Taxes? Homeownership is no exception. There are taxes which hit when you buy. Some come around annually every year. Others only show up when it’s time to sell. And believe it or not, there are actually a few instances where our tax system actually gives home buyers a break.
Land Transfer Tax
The most significant of these taxes when you buy is the Land Transfer Tax. Now, everyone in Ontario is subject to a Land Transfer Tax as a buyer. It’s a graduated, tiered tax that increases the more expensive the home. The City of Toronto looked at this Land Transfer Tax and thought it was a wonderful revenue generating idea, and as a result homes in Toronto are subject to the famous “Double Dip”, paying double the land transfer tax of the rest of the province.
With a $1,000,000 purchase in Toronto, a buyer can expect to pay $16,475 provincially and $16,475 municipally, for $32,950 total of a Land Transfer Tax. It’s staggering: you haven’t even bought furniture for your new home, and you’ve already purchased the government a very nice Honda Civic. The city added a “luxury tax” (remember Monopoly) for homes over $3,000,000 in April of 2026. As an example, a $3,200,000 home purchase in Toronto would cost $66,475 provincially and $68,475 municipally, for a total of just under $135,000.
Buying a home in Toronto? Here are a few more posts you might find helpful:
- How to Buy a Home in Toronto Without Overpaying
- Home Buying Deal Breakers and Not-So-Big-Deals
- What to Expect at a Home Viewing
Property Tax
Upon ownership, homeowners become subject to property taxes, an annual subscription cost of sorts for home ownership. In Toronto, property taxes are not based on the amount paid for the house. Rather, the city assesses the value of the house and the applicable tax rates are applied accordingly. In 2026, the tax rate is roughly .77% of the home’s assessed value, and the proceeds apply to city taxes, the provincial education portion, and a Toronto City Building Fund levy. A common misconception is that school taxes are a separate bill, but in reality it’s a component of your larger property tax bill. Think of property taxes less as one tax and more as a prix-fixe menu of taxes, where substitutions are unfortunately not permitted!
Learn more about property taxes by reading: Can You Claim Property Taxes on Your Tax Return in Canada?
Vacant Home Tax
Toronto has a uniquely special tax that largely does not exist elsewhere, and this is the Vacant Home Tax. In an attempt to deter speculators and investors sitting on properties and choking housing supply, the city introduced this tax for any home which is unoccupied for more than six months of a calendar year. This was implemented by having owners make an annual occupancy declaration, and if the property is declared vacant, then the tax applied is 3% of the property’s assessed value. For a home assessed at $1,000,000, that’s a $30,000 annual bill. Unfortunately, “but obviously I live there” is not the city’s preferred filing method, so this is a tax to be aware of.
Selling a vacant home? Read our post How to Sell a Vacant House for a closer look at the process.
Capital Gains Tax
When it comes time to sell your house, there are tax considerations too. The most common question I hear is about capital gains taxes. “If I bought my house for $800,000 and then years later I sold it for $1,300,000, do I have to pay capital gains tax on the $500,000”? In short, the answer is generally no.
In Canada, primary residences are exempt from Capital Gains tax, so if the property in question was a seller’s primary residence, it’s not going to be taxed. The sale does still need to be disclosed to the CRA, though, and this exemption does not apply to rental properties, investment properties, homes purchased with the intention to resell, or secondary properties. It’s prudent to consult with a tax professional whenever you sell a home, but Canadian’s are fortunate to not have to consider taxes on the returns if the home is their primary residence.
Read more about investing in Toronto with these posts next:
- Can You Use the FHSA for an Investment Property in Canada?
- Is Real Estate a Good Investment?
- How to Rent Out Your Condo
Home Flipping Tax
Another attempt to curtail the real estate market was Canada’s introduction of a Flipping Tax. In short, if a property is owned for less than 365 days between purchase and sale, the profit on the sale is to be treated as business income rather than a capital gain. There are exceptions to this if certain “life-event” instances apply, but the intention of this tax was to prevent home flipping for profit, and the CRA can scrutinize if the intention of a purchase and subsequent resale was for flipping even if it is longer than 365 days between purchase and sale.
Do You Pay HST on Home Sales in Ontario?
Typically, when you purchase a resale home HST isn’t something you’re adding on to the purchase. With a brand-new build or substantially renovated property, it’s not quite as simple. New homes are subject to HST, however there are cases where builders will structure their list prices including these taxes or will over incentives to offset them. It’s a good idea to scrutinize the details of any new home purchase to ensure a complete understanding of what you are paying for, and to avoid any unwanted surprises.
Learn more about the various fees and costs associated with buying and selling by reading: What Buyers and Sellers Need to Know About Real Estate Fees in Toronto
Tax Breaks For Home Buyers and Owners
While it seems like there are endless ways that home ownership can result in giving the government money, there are also many opportunities to be aware of where you can get some money back.
Many of these benefits are structured for first time home buyers. First time home buyers are eligible both provincially and municipally for rebates on their land transfer tax. A home in Toronto is eligible for $8,475 back between the province and the city.
Further, the government recently introduced the First Home Savings Account (FHSA). This investment account allows a contribution of $8,000 which is tax deductible up to a total of $40,000 for a lifetime, and the withdrawal for a home purchase is tax-free. This can be combined with a $60,000 withdrawal from an RRSP toward a qualified home through the Home Buyer’s Plan, offering tax efficient ways to access money for an initial home downpayment.
Learn more about tax breaks like this by reading: Government Incentives for First-Time Buyers in Toronto
Is My Mortgage Tax Deductible?
It’s one of the most common questions we get. In short, for most Canadians living in their principal residence, the answer is no.
Mortgage payments aren’t typically tax-deductible, but things can change when a property is being used to earn income. For example, mortgage interest on a rental property may be deductible, but repayment of the mortgage principal itself is not.
Misc. Taxes Home Owners Should Know
Does that cover every tax consideration associated with home ownership? No, not quite. Circumstances such as investment properties, short-term rental, non-resident buyers, purchases in corporations, converting an intended use of a property, and other atypical ownership situations can create different tax considerations. Regarding these types of situations, we’ve gone beyond “thing a Toronto home buyer or seller should know” into “things that should be discussed with an accountant”.
In sum, that’s really the intention of this article. One doesn’t have to be a tax expert to buy or sell a home in Toronto, but understanding what will be owed, when it will be owed, and what rebates or exemptions might be possible is critical to minimizing stress and maximizing success of any transaction.
Toronto real estate can feel expensive enough in the best of times. The last thing you want is to be caught unaware of a tax obligation, or even worse, paying more than you need to. For more buying and selling advice, get in touch with us today by calling or emailing us directly.
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