What Taxes Do You Pay When Buying a House?

Taxes are a fact of life for us Canadians. When shopping at a local retail outlet or splashing out for a night of entertainment, we think almost nothing of adding an extra 13% on everything.

Buying a house is different. With the average price in Toronto sitting at over $1 million, an additional tax can mean the difference between affordable and going way over budget. As such, asking what taxes go along with a home purchase is a fair question. Today, we’ll explore these extra costs in more detail so you know what to expect on closing day.

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Is There HST on a House? It Depends

In Ontario, we have become accustomed to tacking a 13% tax on almost all goods and services, with a few exclusions for necessary items like groceries and medical prescriptions. What about a house? It’s certainly a necessity. Whether or not you pay HST and any exemptions depends on the type of property you buy.

Fortunately, all resale homes in Ontario are exempt from HST. In other words, if you’re buying a house someone has already lived in, there is no HST. This is a big relief when you consider all of the legal fees and other closing costs before you can take possession.

The situation changes if you buy a pre-construction unit or a newly-constructed home where you will be the first owner. These are subject to HST, and even substantially renovated houses can fall under this umbrella. Fortunately, there may be some relief.

You can apply for a rebate on the provincial portion of the tax for a new or substantially renovated house, to a maximum of $24,000 in savings. To qualify, it must be a primary residence for either you or a relative.

Federally, the guidelines state that the property value must be less than $450,000. This would disqualify nearly every house in Toronto, if not the entire province! However, a separate Ontario initiative still allows you to claim the rebate, regardless of the purchase price, as long as all other conditions are met.

(Note: in 2026, the Ontario government temporarily expanded the HST rebate to the full 13% to a maximum of $130,000 on new homes valued up to $1.5 million. Purchases between April 1, 2026 and March 31, 2027 can qualify. Buying during this window can make your new home significantly more affordable.)

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Land Transfer Taxes

Regardless of whether you purchase a resale home or a newly constructed property, there is no escaping land transfer fees. This is a tax that you pay upon your closing date to the Ontario government so the real estate lawyer can register the property in your name.

When buying in the city, it’s important to remember that Toronto also has a separate municipal tax, which doubles the amount owing on all homes valued up to $3 million. If your purchase exceeds that amount, it’s subject to an additional luxury tax.

Both the provincial and municipal land transfer taxes are based on a tiered percentage of the purchase price and must be paid in cash before your transaction can close. If you’re a first-time home buyer, you can claim an Ontario rebate of up to $4,000, and a Toronto rebate for up to $4,475 for a combined savings of $8,475.

Looking for even more advice before beginning your house hunt? Start with the posts below:

What About Capital Gains?

While we’re on the subject of taxes, we might as well address capital gains. People have a lot of strong opinions, and rightly so! There are also a lot of questions and misconceptions around the topic.

You do not pay capital gains when buying a house in Ontario; however, you do want to be aware of how they work and when they could come into play.

Capital gains are a tax you pay on the increase in the value of any asset you own. This includes stocks, jewellery, vehicles, business interests, and real estate, such as vacation homes or rental properties. Capital gains are calculated based on 50% of any appreciation. (Fortunately, talks of increasing this amount to 67% were later shelved!).

As long as you own the asset, there is no worry. However, capital gains come due once you decide to sell. A real estate example is if you buy a secondary property for $500,000 and sell it years later for $600,000. In this case, you have a gain of $100,000.

50% of that increase is taxable. This means you add $50,000 to your income tax return. As you can imagine, this can substantially increase your amount at the end of the fiscal year.

There is good news when buying (or selling) the house you live in. Your primary residence is exempt from capital gains, now and in the future. Any equity gains are yours, which you can use to expand your possibilities for your next steps.

Are you in the planning stages of buying your next home? Our Etobicoke real estate agents are here for anything you need. Reach out today at 647-282-7653 or email contact@sileckythompson.com with any questions or to get started.