When you purchase a home, you need to pay a land transfer tax, which is informally known as "welcome tax". This amount is included in the closing cost of your home, and it tends to frustrate many people - why am I paying this large sum as a "welcome" into the neighbourhood? 

Put simply, this is a tax paid to the city when they change the name on their register from the previous owner to your name. The money goes into the common tax fund for the city, and with that money, they pay for services and help improve the municipality. People often ask, "does the amount change significantly based on the price? How do we calculate it?" 

First, it's important to note that the price is dependent on the sale price or the municipal evaluation - whichever is higher. Using that number, the city will calculate what your welcome tax will be. 

Now, the welcome tax is on a sliding scale: the higher the purchase price, the more you're going to be taxed.

For example, if you were to purchase a home for $300,000, your welcome to tax would be $3,000. On a $500,000 home, your welcome tax would be $6,000. You'll notice it isn't directly proportional based on the amount you pay; it is calculated in tranches. If we were to look at an amount of $750,000, your welcome tax would make its way up to $11,000, and if we go all the way up to $1,000,000, we would be looking at $16,000 in welcome taxes.

In short, this tax is unfortunately unavoidable, but it will also be used to beautify and maintain your municipality. So it's not all downside!

If you have any more questions about taxes or costs associated with home ownership, reach out - we're always here to help.