Understanding Toronto Real Estate Taxes
Real estate taxes in Toronto extend beyond annual property tax. From purchase to ownership to sale, understanding your tax obligations helps you budget accurately and avoid surprises.
Property Taxes
How Property Tax Works
Toronto property tax is calculated by multiplying your property's assessed value by the municipal tax rate. The 2026 residential tax rate is approximately 0.63% of assessed value.
Assessment Value
MPAC (Municipal Property Assessment Corporation) assesses property values every four years. Your assessed value may differ from market value—often lower in appreciating markets.
Annual Property Tax Examples
- $800,000 assessed value: ~$5,040/year ($420/month)
- $1,200,000 assessed value: ~$7,560/year ($630/month)
- $2,000,000 assessed value: ~$12,600/year ($1,050/month)
Payment Options
- Monthly: Pre-authorized payments (most common)
- Installment: Two payments per year
- Through mortgage: Lender includes in payment
Land Transfer Tax (LTT)
Provincial Land Transfer Tax
Paid at closing to the Province of Ontario:
- 0.5% on first $55,000
- 1.0% on $55,000 to $250,000
- 1.5% on $250,000 to $400,000
- 2.0% on $400,000 to $2,000,000
- 2.5% on amounts over $2,000,000
Toronto Municipal Land Transfer Tax
Additional tax for properties within Toronto:
- 0.5% on first $55,000
- 1.0% on $55,000 to $250,000
- 1.5% on $250,000 to $400,000
- 2.0% on $400,000 to $2,000,000
- 2.5% on amounts over $2,000,000
First-Time Buyer Rebates
- Provincial rebate: Up to $4,000
- Toronto rebate: Up to $4,475
- Total potential savings: $8,475
To qualify, you must never have owned property anywhere in the world.
Capital Gains Tax
Principal Residence Exemption
If the property was your principal residence, capital gains are tax-free. You must designate one property as principal residence per year.
Investment Property Capital Gains
For non-principal residence properties:
- 50% of gain is taxable at your marginal rate
- Gain = Sale price - (Purchase price + improvements)
- Example: $200,000 gain × 50% = $100,000 taxable
Calculating Capital Gains
Example:
- Purchased: $600,000
- Improvements: $50,000
- Selling costs: $35,000
- Sale price: $850,000
- Capital gain: $165,000
- Taxable gain (50%): $82,500
- Tax at 40% marginal rate: $33,000
Rental Property Tax Implications
Rental Income Taxation
Net rental income is taxable:
- Gross rent minus eligible expenses
- Taxed at your marginal rate
Deductible Expenses
- Mortgage interest (not principal)
- Property taxes
- Insurance
- Maintenance and repairs
- Property management fees
- Utilities (if landlord pays)
- Advertising
- Professional fees
Capital Cost Allowance (CCA)
You can claim depreciation on rental property, but this reduces your cost base and increases capital gains when selling. Consult an accountant before claiming CCA.
Non-Resident Taxes
Non-Resident Speculation Tax
25% tax on properties purchased by non-Canadian citizens or non-permanent residents (with some exemptions).
Withholding Tax
When non-residents sell Canadian property, the buyer must withhold 25% of sale price (or obtain clearance certificate).
HST on New Homes
When HST Applies
- New construction from builders
- Substantially renovated homes
- Pre-construction purchases
New Home HST Rebate
Partial rebate available for homes under $450,000, phasing out to $0 at $450,000+. Maximum rebate: approximately $24,000.
Tax Planning Strategies
- Maintain records of all improvements
- Track rental expenses carefully
- Consider timing of sale
- Designate principal residence strategically
- Work with a tax professional
This guide provides general information. Consult a tax professional for advice specific to your situation.
