From Chrétien to Trudeau: The Bipartisan Evolution of Real Estate Taxation in Canada’s Hottest Market

So I was helping a client dig up some info on their home as they…pun intended…are planning to dig out their basement. An underpinning. Usually, a contractor will ask for a survey. If you don’t have one, you can get one online for up to $500 or get a new one done for around $2K. Anyway, that’s not the point of this. During the dig, I came across this 1994 Deed/Title Transfer doc.

It got me thinking about what the differences were then vs. now and who was responsible for them but most importantly, why they happened.

And here’s what I discovered.

The Cost of Buying a Home in Toronto: 1994 vs. 2025

For anyone who’s been watching Toronto real estate, it’s no secret that affordability has shifted dramatically over the years. But beyond the eye-watering price increases, how much have taxes changed? To keep the comparison fair, let’s break it down using a home price adjusted only for inflation—not actual market appreciation.

Land Transfer Tax (LTT) Then vs. Now

One of the most significant costs associated with purchasing a home in Toronto today is the Land Transfer Tax (LTT). While buyers in 1994 only had to deal with Ontario’s provincial tax, since 2008, Toronto buyers have been hit with a Municipal Land Transfer Tax (MLTT), effectively doubling the tax burden.

1994 (Ontario Only)

Only Ontario’s Land Transfer Tax (LTT) applied.

Rates:

• • 0.5% on the first $55,000
  • 1.0% on $55,000 – $250,000
  • 1.5% on $250,000 – $400,000
  • 2.0% on amounts over $400,000

2025 (Ontario + Toronto MLTT)

Toronto homebuyers now pay both Ontario’s LTT and the MLTT.

Rates:

• Same structure as Ontario’s LTT, but doubled because Toronto charges the same tax again.
• Additional 2.5% tax on amounts over $2 million.

How Do These Taxes Compare in Real Dollars?

Let’s assume a home was purchased in 1994 for $300,000. Instead of using today’s real market values (which have skyrocketed far beyond inflation), we adjust that $300K home for inflation alone. In 2025, that same home would be worth $564,000 using historical CPI data.

Year	Home Price ($)	Ontario LTT ($)	Toronto MLTT ($)	Total LTT ($)
1994	300,000	2,975	0	2,975
2025 (Inflation-Adjusted)	564,000	8,460	8,460	16,920
2025 (Market Value)	1,200,000	22,950	22,950	45,900

In 1994, buyers paid $2,975 in LTT. Adjusting for inflation alone, that same purchase today would come with a total LTT of $16,920 due to the MLTT doubling the cost. But we’re in reality not just some inflation-only fantasyland, so in fact, that same home today would cost roughly $1.2mm (our clients purchased it in 2019 for around $900K), and although property taxes are lower, the fees are intense. $3,000 turned into $45,900. And here we are, pretending that it’s ok. Lol.

Estate and Capital Gains Tax: Then vs. Now

One of the most significant differences in tax exposure between 1994 and today is the cost of transferring a primary residence to a loved one—whether upon death or as a living transfer.

1994: No Capital Gains on Primary Residences

• The principal residence exemption fully shielded homes from capital gains tax when passed on to heirs or transferred to a family member.
• Estate administration tax (probate fees) applied, but these were relatively low.
• If the transfer was made while the owner was alive, there was typically no immediate tax consequence, assuming it was gifted within the family and the recipient continued using it as a primary residence.

2025: Changes to Tax Exposure for Both Donors and Recipients

• As of now, the principal residence exemption still applies, meaning there is no capital gains tax when passing a primary residence to a loved one.
• However, the federal government has proposed raising the capital gains inclusion rate in 2024, which could increase tax exposure on secondary properties or investment properties.
• For donors: If the property being transferred was not a principal residence, capital gains tax applies immediately, and the donor may owe tax on the property’s appreciation.
• For recipients: While a principal residence remains exempt, inheriting or receiving a secondary property comes with higher capital gains exposure if they choose to sell it later.
• Probate fees have increased, and estate tax planning has become more complex, particularly for families with multiple properties.

Who Was Behind These Changes and Why?

1994: A Strong Economy and Minimal Estate Tax Exposure

• The principal residence exemption was maintained under Jean Chrétien’s Liberal government.
• The Canadian economy in the mid-90s was emerging from the early 90s recession, but real estate prices were relatively stable, and there was no immediate pressure to introduce new taxation on estates.
• Government priorities were focused on reducing federal debt rather than increasing taxation on inheritances.

2024 Proposed Changes: A Response to Fiscal Shortfalls

• The Trudeau government announced potential capital gains tax increases that could affect estate transfers, particularly for secondary properties, though primary residences remain exempt for now.
• These proposed changes come as Canada faces significant fiscal challenges, including ballooning federal debt due to pandemic-era spending, increased housing demand, and economic pressures such as inflation.
• With fewer real estate transactions (and consequently lower MLTT revenues in Toronto), governments are looking for alternative revenue streams, and taxing estates has been proposed as one way to close budget gaps.

How Low Sales Are Hurting Toronto’s Budget

Since the MLTT was introduced in 2008, it has become one of Toronto’s biggest revenue sources, generating over $1 billion annually in peak years (2021-2022). But with home sales way down in 2023-2024, this revenue source has taken a major hit, contributing to Toronto’s $1.776 billion budget shortfall.

To compensate, the city has:

• Increased property taxes by 8%
• Raised the City Building Fund levy by 1.5%
• Offloaded assets like the Don Valley Parkway & Gardiner Expressway to the province to reduce infrastructure costs

The Bottom Line

Even when we strip out market appreciation and focus only on inflation, today’s buyers are paying significantly more in upfront taxes than they would have in the past. The MLTT alone has doubled the cost of land transfer tax, and as Toronto’s budget struggles with declining home sales, future tax increases seem inevitable.

Additionally, while primary residences are still largely protected from capital gains tax, estate planning is becoming increasingly complicated, and proposed legislative changes could make passing down wealth more costly in the future.

If you’re transferring property within your family, tax consequences depend heavily on whether the property is a primary residence or an investment property—a key consideration that didn’t impact transfers as much in 1994.

Want to discuss how these changes impact your next move? Let’s chat.

Share: