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Let's talk TAX!

It's the tax season! No one likes to pay taxes but it's our duty as citizens to pay our taxes. So let's learn about some of the taxes associated with owning a house and how we can save on paying them!

Taxes associated with buying a new home

1. Duties on transfers of immovables (Welcome tax/ Taxe de Bienvenue) - one time fee

When you a buy a house, condo or land in Quebec you are subject to land transfer tax also known as "Welcome tax" or "Taxe de Bienvenue", which is due upon closing. Since January 1, 2018, the brackets as provided in the  Act respecting duties on transfers of immovables are modified annually according to parameters established by the ministère des Affaires municipales et de l'Occupation du territoire. 

The transfer duties for properties in Montréal are calculated as follows.

Basis of imposition

The basis of imposition corresponds to the greater of the following three amounts:

  • The amount of the consideration furnished for the transfer of the immovable (amount actually paid excluding GST and QST)

  • The amount of the consideration stipulated for the transfer of the immovable (amount shown on the deed of sale)

  • The amount of the market value of the immovable at the time of its transfer (value entered on the property assessment roll).

Rate per bracket - 2019 fiscal year :

On that part of the basis of imposition:

  • Which does not exceed $50 900: 0.5%

  • Which is in excess of $50 900 but does not exceed $254 400: 1.0%

  • Which is in excess of  $254 400 but does not exceed $508 700: 1.5%

  • Which is in excess of  $508 700 but does not exceed $1 017 400: 2.0%

  • Which exceeds $1,017 400: 2.50%

Example - Calculations using $560 000 as basis of imposition :

  • $50 900 x 0.5% = $254.50

  • $203 499 ($254 400 - $50 901) x 1.0% = $2 035.00

  • $254 299 ($508 700 - $254 401) x 1.5% = $3 814.50

  • $51 302 ($560 000 - $508 698) x 2.0% = $1 026.00

For a basis of imposition of $560 000 total fees will be: $7 130.00

2. Property Taxes - recurring fee (yearly)

There are two types of property taxes in Quebec: municipal tax, and school taxes.

Property taxes

Property taxes cover public expenses related to your property, such as:

  • Garbage removal

  • Recycling collection

  • Snow removal

  • Fire services

  • Police

  • Public Landscaping

  • Road maintenance

  • Street lighting, etc.

Property taxes are determined by each municipality and may change on a year to year basis. Generally speaking, they range between 0.5% and 2.5% of your property’s market value.

School taxes

School taxes contribute to the maintenance of educational institutions in your neighbourhood, and are paid in two instalments per year to the Comité de Gestion de la Taxe Scolaire de l’Île de Montréal (CGTSIM). The 2016-2017 school tax rate is $0.17765 per $100 of assessed value. Last year’s rate was $0.18839.

For example, if your home is assessed at a value of $300 000, and your tax rate is 1%, your property tax bill will be issued yearly at $3000. Your school tax will depend on municipality and year, but you can expect around $532.95 for a $300 000 property.

3. New build GST/QST - one time fee

As you are well aware, in Canada most goods and services are subject to the goods and services tax (GST) and in Quebec they are subject to the Quebec sales tax (QST). Both these taxes apply to the sale of "new built condos" or "new built home". Some builders include the QST in their sale price while others don’t, make sure to check. Otherwise, you’ll have to pay this cost upfront on closing day.

For example, if you are purchasing a new built home at a value of $300 000, your will need to pay a GST of 5% and QST of 9.975%, so a total of $44 925 on top of $300 000.

Tax credits for homebuyers

As seen above, there are a lot of tax expenses associated with buying a house but worry not, as a homeowner, there are some Federal and Provincial tax deductions and tax credits which depending on your situation, may be available for you to claim.

1. Home Buyers Tax Credit

You'll get access to this tax credit once you’ve purchased your first home and submitted a tax return. This tax credit is an effective means of offsetting some of the upfront costs associated with buying a home, such as legal fees and land transfer taxes.

You can claim $5000 for the purchase of a "qualifying home" if both of the following apply:

  1. you or your spouse or common-law partner acquired a qualifying home; and

  2. you did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years (first-time howe buyer)

Qualifying home: must be registered in you and/or your spouse/common-law partner's name in accordance with the applicable land registration system and located in Canada. Includes existing homes and homes under construction.

Qualifying homes includes:

  • single-family houses

  • semi-detached houses

  • townhouses

  • mobile houses

  • condominiums units

  • apartments in duplexes, triplexes, fourplexes, or apartment buildings

The tax credit is calculated by multiplying the rate for the first taxable income bracket of the personal income tax table for the year (which is currently 15%) by $5,000. Thus, the maximum value of the tax credit that an individual can deduct from his or her income tax payable for the year is $750.

2. GST/QST New Housing Rebate

In the previous section, we saw that both GST/QST apply to the purchase of "new built condos" or "new built home". But good news! The GST/QST New Housing Rebate program allows home buyers to receive a rebate (or partial refund) on the taxes paid on the purchase of newly constructed homes that will be used as a primary place of residence.

In order to qualify for this rebate, all the following conditions must be met:

  • You purchase land and new housing from a builder

  • The housing is a single-unit residential complex (including a duplex) or a residential unit held in co-ownership (a condo)

  • You purchase the housing to be your primary place of residence, or the primary place of residence of a relative

  • Ownership of the property is transferred to you once the construction is substantially completed

  • The housing and land were acquired in the same transaction

  • You or one of your relatives is the first to occupy the premises once construction is complete

How is the GST/QST New Housing Rebate calculated?

The GST rebate: The federal portion of the rebate is calculated at 36% of the GST paid on the purchase price of the property, to a maximum of $6,300. The rebate is progressively reduced when the price of the new condo is greater than $350,000 but less than $450,000. There is no GST rebate available where the purchase price is $450,000 or more.

The QST rebate: The provincial tax rebate is equal to approximately 50% of the total QST paid on the purchase price of the new home. The maximum QST refund amount is $9,804. The rebate is progressively reduced when the price of the condo exceeds $200,000, but is less than $300,000. New homes that cost $300,000 or more do not qualify for a QST rebate.

Applying for the rebate

Your application must be filed with Revenu Quebec within two years after the date on which ownership of the property was transferred to you.

3. Montreal Home Purchase Assistance Program

With its many benefits, the Montreal home purchase assistance program could make your dream more attainable.

If you’re buying a residential property in Montreal, take advantage of:

  • A lump sum financial assistance when you purchase a new property

  • A refund of your real estate transfer tax when you buy an existing property (a divided co-ownership, a single-family home, or a rental property with 2, 3, 4, or 5 above-ground dwelling units) if you are a family with at least one child under 18 or a child who will be born or adopted no later than 9 months after the property is purchased.

4. Homeowners Who Work From Home

If you work from your home, there are a number of expenses that you can deduct if you are either self-employed, a commissioned employee or a professional.   The amount that you are eligible to claim corresponds to the percentage of the home used for the business and expenses which could be claimed include, but are not limited to;

  • Utilities – heating, water and electricity

  • Insurance

  • Maintenance

  • Internet

  • Office supplies

  • Cleaning supplies, etc.

Paying taxes is not the most pleasant thing to do, but keep in mind that there are a lot of programs out there to help you be a home owner! So be informed and know what is available to make your first home buying experience a pleasant one!

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