February 2nd, 2025 | Buyers
Toronto’s Luxury Land Transfer Tax: What You Need to Know
Toronto’s New Luxury Land Transfer Tax: What You Need to Know
A new year means new changes, and for Toronto’s real estate market, 2024 has brought a significant one. As of January 1st, the City of Toronto has introduced a new “Luxury Land Transfer Tax,” and if you’re planning to buy a home valued at $3 million or higher, this is something you need to pay attention to. Let’s break it down and discuss what this means for buyers, sellers, and the broader market.
What is the Toronto Luxury Land Transfer Tax?
Back in September 2023, Toronto City Council voted in favor of a steep increase in land transfer taxes for high-end properties, officially taking effect at the start of 2024. This means that if you’re buying a home for $3 million or more, your closing costs are about to get a whole lot higher. This new tax is in addition to Ontario’s existing land transfer tax of 2.5%, and the new Municipal Land Transfer Tax (MLTT) rates now work on a sliding scale:
- $3M – $4M: 3.5%
- $4M – $5M: 4.5%
- $5M – $10M: 5.5%
- $10M – $20M: 6.5%
- $20M+: 7.5%
For comparison, before January 1st, the maximum municipal land transfer tax in Toronto was 2.5%, meaning that these new rates represent a dramatic increase in costs for high-end buyers.
It’s important to note that if your Agreement of Purchase and Sale was signed before January 1st but closes after, you’ll still be subject to the new tax rates. There’s no way around it—if you’re buying luxury real estate in Toronto, you’ll be paying more.
Buying a $15 Million Home Under the New Rules
Let’s put this into perspective with a real-world example. Say you’re purchasing a $15 million luxury home in Toronto. Under the new tax regime, you’d be looking at a staggering $975,000 just in municipal land transfer tax. Compare that to what you would have paid under the previous rules—$375,000—and the increase becomes painfully clear.
And don’t forget, this is on top of the provincial land transfer tax of 2.5%, which adds another $375,000. That brings your total land transfer tax bill to $1.35 million. Yes, you read that right—just the act of buying the home comes with a seven-figure tax bill.
What Does This Mean for the Market?
It’s hard to imagine that a tax increase of this magnitude won’t have some kind of impact. Toronto’s market has already been moving cautiously due to high borrowing costs and economic uncertainty, and now luxury buyers are faced with an even bigger financial hurdle. Will this deter high-end clients from making purchases? Early indicators suggest that while some luxury buyers aren’t happy, many are still going forward with their transactions. Let’s be real—if you’re in a position to buy a $10M+ home, an extra tax isn’t necessarily going to stop you.
That said, there could be an unintended consequence: inventory constraints. Buyers who were considering moving into the $3M+ range may now hold back to avoid the extra tax burden, keeping them in the under-$3M market instead. That shift could put more pressure on inventory levels in the lower segments, making an already tight market even tighter.
Will Buyers Look Elsewhere?
Toronto is unique in Ontario for having an additional municipal land transfer tax on top of the provincial one. This raises an important question—will buyers take their money elsewhere? It’s possible. While Toronto’s appeal is undeniable, buyers who are on the fence might start considering high-end neighborhoods in Mississauga, Oakville, or other nearby municipalities where they won’t be hit with this extra tax. Over time, this could boost demand in those areas while dampening Toronto’s luxury market.
Final Thoughts
If you’re buying or selling in Toronto, staying informed about these changes is crucial. The new Luxury Land Transfer Tax is a big deal, and it could shape the market in ways we have yet to fully see. If you have questions about how this tax might affect your real estate plans, reach out—we’re here to help you navigate Toronto’s evolving market with confidence.
