How to Calculate Land Transfer Tax

Land transfer tax is excised when a buyer purchases land or interest in land. Land can be identified as future construction, buildings and home improvements such as appliances or cabinetry. The tax is formulated based on the price paid for the property. The remaining debt on any mortgage on the property is also figured in. Some rules allow for the tax to be based on a fair market value of the land. Many states in the United States and provinces in Canada utilize the land transfer tax.

Things You'll Need

• Land transfer tax refund application

Instructions

1. Find a tax and assessments office (if in the United States) and land registry office (if in Canada) to help you with the land/agricultural transfer tax questions.

2. Calculate the tax rate. For example, for properties in Ontario, Canada, valued at $55,000 or below, the amount is 0.5 percent; 1 percent exceeding $55,000 to $250,000; and 1.5 percent exceeding $250,000. For properties exceeding $400,000 that have one home but not more than two, the tax is 2 percent. In the United States, Maryland employs the Agricultural (Land) Transfer Tax, based not on purchase price, but on size of the property. If the land transfer in Maryland is 20 acres or more, the tax is 5 percent of the purchase price. If it's less than 20 acres, it's 4 percent. And if it's less than 20 acres with a building with improvements to be made, it's 3 percent.

3. Determine as a first-time home buyer if you're entitled to a refund or waiving of the tax. For example, if you are a first-time buyer in Ontario, you're eligible for a refund for a resale or newly constructed homes. The Ontario Land Transfer Tax Refund Affidavit for First-time Purchasers of Eligible Homes Applications can be obtained online or at the land registry office. The application must be received to the land registry office no later than 18 months after the purchase of the home and property. The refund maximum is $2,000. Conversely, in Maryland, the transfer tax is only assessed when the land buyer doesn't continue to use the property as woodlands or farm land. Exemption rules vary state to state.

4. File the tax electronically, where available, to save time. Check your local municipality's website in the United States or Canada to see if they offer online applications, waivers, etc.

5. Call your local tax office through your local municipality or land registry office for tax calculations and payment options.

References

• Ontario Minstriy of Revenue
• Realty Times
• Maryland Department of Assessments and Taxation