Transfer Property to a Corporation Tax Calculator, Ontario
Moving a rental property into a corporation triggers land transfer tax in cash, a deemed sale at market value, and recapture of every dollar of depreciation you have claimed. Work out all three, see what a section 85 election defers and what it does not, and get an honest answer on whether the annual tax position improves at all.
cash cost on day one
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Land Transfer Tax, the Cost Nobody Budgets For
| Item | Basis | Amount |
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Income Tax on the Transfer Itself
| Item | Basis | Amount |
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Total Cash Cost on Day One
| Item | Basis | Amount |
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Owning It Personally Against Owning It Corporately
| Step | Basis | Personally | In a Corporation |
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Points That Decide This
What to Do Next
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Disclaimer: Land transfer tax is calculated on fair market value using the Ontario rates and, where selected, the Toronto municipal rates including the escalating residential tiers above $3,000,000. Where land is transferred to a corporation in exchange for shares, the Ministry of Finance generally treats the value of the consideration as the fair market value of the land, and any mortgage assumed is consideration in its own right. A transfer for nominal consideration with no debt assumed can be treated differently and needs a legal opinion. Income tax assumes a non-arm’s length transfer at fair market value, recapture calculated as the building’s original cost less its undepreciated capital cost, and a section 85 elected amount set at the greater of the tax cost and the non-share consideration. Corporate rental income is treated as investment income at 50.17% with 30.67% refundable, which changes where the corporation employs more than five full-time employees in the business. This page is general information, not tax or legal advice.
Three Separate Taxes, and Only One of Them Can Be Deferred
Landlords usually arrive at this question having heard that a section 85 rollover lets you move property into a corporation without tax. That is true of one of the three taxes involved and false of the others.
| Tax | Deferred by a Section 85 Election |
|---|---|
| Capital gain on the appreciation | Yes |
| Recapture of capital cost allowance | Yes |
| Land transfer tax | No, payable in cash on registration |
| HST on commercial property | Self-assessed, usually neutral for a registrant |
Land transfer tax is the number that ends most of these conversations. On a $1,200,000 rental property it is $20,475 outside Toronto and $40,950 inside it, payable in cash on the day the transfer registers. There is no relief for a transfer from an individual to their own corporation, and no election defers it.
Ontario Land Transfer Tax Rates
| Portion of Value | Rate |
|---|---|
| First $55,000 | 0.5% |
| $55,000 to $250,000 | 1.0% |
| $250,000 to $400,000 | 1.5% |
| $400,000 to $2,000,000 | 2.0% |
| Above $2,000,000, residential only | 2.5% |
Toronto Municipal Land Transfer Tax
Inside the City of Toronto a municipal land transfer tax applies on top of the provincial one, at the same base rates, so the effective cost roughly doubles. Since 2024 the residential rates escalate sharply at the top end.
| Portion of Value | Toronto Rate |
|---|---|
| Up to $2,000,000 | Same as the provincial rates |
| $2,000,000 to $3,000,000 | 2.5% |
| $3,000,000 to $4,000,000 | 3.5% |
| $4,000,000 to $5,000,000 | 4.5% |
| $5,000,000 to $10,000,000 | 5.5% |
| $10,000,000 to $20,000,000 | 6.5% |
| Above $20,000,000 | 7.5% |
A first-time buyer rebate is not available to a corporation. Neither is any of the other relief aimed at individuals.
The Income Tax on the Transfer
Because you and your corporation are not dealing at arm’s length, the transfer is deemed to happen at fair market value whatever price you put on it. Two amounts arise.
- A capital gain equal to market value less the adjusted cost base, half of which is taxable.
- Recapture of every dollar of capital cost allowance claimed on the building, which is fully taxable business income rather than a capital gain.
Recapture is the part landlords forget. Ten years of depreciation on a building comes back into income in a single year, at the full marginal rate, on a transfer that produced no cash.
What a Section 85 Election Does
Section 85 lets you and the corporation jointly elect a transfer price different from market value, on Form T2057 filed with your personal return. Elect at the tax cost and the gain and the recapture both disappear until the corporation eventually sells.
The election has limits. The elected amount cannot be less than the fair market value of any non-share consideration you receive, and it cannot exceed fair market value. That first limit is where rollovers go wrong.
The Mortgage Trap
A mortgage assumed by the corporation is non-share consideration. If it exceeds the tax cost of the property, the elected amount is forced up to the mortgage and the difference is taxable however carefully the election is drafted.
| Situation | Result |
|---|---|
| Mortgage of $400,000, tax cost of $480,000 | Fully deferred |
| Mortgage of $500,000, tax cost of $480,000 | $20,000 of gain triggered |
| Mortgage of $900,000, tax cost of $480,000 | $420,000 of gain triggered |
The fix is usually to reduce the debt being assumed, or to have the corporation take promissory notes rather than assume the mortgage, and it has to be arranged before the transfer rather than explained afterwards.
HST on the Transfer
A used residential complex is an exempt supply, so no HST arises on transferring a residential rental property. Commercial real property is a taxable supply, and where the corporation is registered it self-assesses on closing rather than paying the tax to you, which makes the net cost nil. Where the corporation is not registered, the tax is a real cash cost, so registration should happen before closing.
The Annual Position, Which Is the Real Surprise
Most landlords incorporate expecting the 11.2% small business rate. Rental income does not get it. Income from property is investment income unless the corporation employs more than five full-time employees in the business, and investment income is taxed at 50.17% in Ontario with 30.67% refundable when dividends are paid.
| Step | Personally | In a Corporation |
|---|---|---|
| Net rent of $100 | $100 | $100 |
| Tax at the first level | $53.53 | $50.17 |
| Dividend refund on distribution | Not applicable | $30.67 recovered |
| Personal tax on the dividend | Not applicable | $38.43 |
| Net in your hands | $46.47 | $42.07 |
The corporation is slightly behind, not ahead. Integration is designed so that earning investment income through a corporation leaves you in roughly the same place, and in Ontario it leaves you a few points worse. If the reason for incorporating is to pay less tax on the rent, the numbers do not support it.
When Incorporating Is Genuinely the Right Answer
- Creditor protection, separating a portfolio from your personal assets and from each other
- Bringing in other shareholders, whether family or investors, which is far cleaner corporately
- Succession planning, where shares are easier to transfer than title and an estate freeze becomes possible
- A genuine active business, with more than five full-time employees, which does get the small business rate
- Scale, where a growing portfolio needs a structure that lenders and partners recognise
- Reinvestment, where profits are being redeployed rather than drawn out, which improves the deferral picture
Practical Points Before You Commit
- Speak to your lender first. A corporate borrower usually means a personal guarantee, a higher rate and a shorter amortisation, and some lenders will not do it at all.
- Get a valuation. The transfer happens at market value whether or not you have evidence of it, and a price adjustment clause is only as good as the valuation behind it.
- File the election on time. Form T2057 is due with your personal return for the year of transfer. Late filing is possible with a penalty, and very late filing is not.
- Deal with the mortgage before the transfer. Debt above the tax cost triggers tax that nothing can defer.
- Budget the land transfer tax in cash. It is due on registration, not at year end.
What This Calculator Does Not Cover
- Multiple properties transferred together, where the elected amounts interact
- A price adjustment clause and what happens if the CRA disagrees with your valuation
- Provincial variations outside Ontario, which have different land transfer regimes
- Non-resident speculation tax and vacant home taxes, which have their own rules on corporate ownership
- The individuals with significant control register and other corporate obligations
- Existing losses or unused capital gains reserves that may change the picture
Model it before you commit, because none of it can be undone. Once the transfer registers, the land transfer tax is spent and the property is corporate. Our section 85 rollover service covers the valuation review, the elected amounts, Form T2057 and the coordination with your lawyer and lender.
Frequently Asked Questions
Common questions from Ontario landlords considering a corporation.
Related Calculators and Guides
More tools for property owners and corporate groups.
Model It Before You Register. None of It Can Be Undone.
Send us the property details, the mortgage and the last capital cost allowance schedule. We will confirm the land transfer tax, set the elected amounts so the mortgage does not trigger tax, prepare Form T2057 and work with your lawyer and lender.