Understanding Property Tax and Assessments in Canada
Monday Jun 21st, 2021
If you’re on the hunt for a first home, or even settling in, you’re likely bracing for the inevitability of paying property taxes. You probably saw the annual property taxes displayed on REALTOR.ca property listings, and might be wondering who sets these rates, what purpose property taxes serve, and how tax rates are determined.
Fortunately, you’re in the right place! Let’s put the magnifier on property tax assessments across Canada.
What is property tax?
Property tax is paid by landowners and funds municipalities’ public services, such as emergency services (fire, police, and paramedic), public schools, parks and trails, as well as road and sewer maintenance. The property tax is set based on the percentage of the market value of a given property, whether it be residential, commercial, industrial, or farm, and is paid to your municipality or regional municipality.
Can I be exempt from property tax?
Some properties and owners may be exempt from paying this tax, including religious buildings, low-income households, and any federal or provincial property. Municipalities set these rules, so it’s best to consult your local municipality for more details on exemptions and eligibility.
How is property tax calculated?
Property tax is determined by multiplying the value of a property by the base municipal and education taxation rate. These rates are set according to the type and use of a property by elected officials based on the city’s budget. They’re also determined by how much revenue comes from services, fines, and provincial transfers. Property values are determined with regular property tax assessments.
For instance, if you owned a property valued at $300,000 and the combined municipal and education tax rate is 1.13%, your annual balance would be: $3,390.
Your municipality will make the information in your tax statements as clear as possible so you know exactly what makes up your property tax. Some charges like waste removal or rural stormwater drainage (ditches) may show up as a flat fee, depending on your municipality or property location.
Your municipality will also give a detailed breakdown of how your tax dollars are being distributed between things such as emergency services, library services, roads and traffic, etc. Understandably, rates differ broadly across Canadian municipalities based on the types of properties, and density.
What is a property assessment?
Property assessments are required to determine the value of your property, which then factors into how much your property tax will be. Keep in mind, property assessments are different from a home inspection or appraisal. A property assessment is the process of determining the value of a property based on the open market sale averages of other properties in the surrounding area. In the case of residential properties, the location (neighbourhood), size of the lot, building type, size, age, and the building materials used, plus any updates or additions, are taken into account to determine value.
Why are property assessments necessary?
Since all properties are different, assessments are necessary to ensure everyone pays a fair share based on the value of their property and how said property is being used. First, property values change over time, either appreciating or depreciating in value, depending on real estate market trends in those areas. Secondly, population sizes change when urban and suburban centres expand with new construction. Property assessments also play a part in determining taxation rates. If property values increase more in comparison to the municipality’s budgetary needs, a tax rate reduction may result.
Who assesses properties, and how often?
Assessments are handled differently in each province and territory and are conducted by either the municipalities, a specific branch of the provincial government, or by independent organizations commissioned by provinces and/or municipalities. Assessment intervals also differ from province to province.
For instance, in British Columbia, BC Assessment was formed to assess all properties annually in the province. Ontario has a similar organization, MPAC (Municipal Property Assessment Corporation), a non-profit corporation whose members are made up of Ontario municipalities, and who conduct assessments every four years.
To dig a little deeper into assessments for your specific province, check out the links below.
- British Columbia
- Quebec (Consult your municipal website for more information.)
- New Brunswick
- Nova Scotia
- Prince Edward Island
- Newfoundland and Labrador
- Yukon Territory
- Northwest Territories
- Nunavut Territory
What can I do if I don’t agree with my assessment?
Since assessments are applied based on averages for your area, it’s possible your property could end up valued higher than it should. Factors such as volume of sales, final selling price, volume of building upgrades or additions, or even densification can increase the perceived value of your home in an assessment. If, for instance, you have been living in your home for a long time without making updates, you can appeal your assessment if you feel it’s too high.
The appeal process differs based on your province. You can request a reassessment in the province or territory where you own property, but if the reassessment maintains the value you believe to be incorrect, then you can submit an appeal.
By now your head may be spinning with all this new information, and that’s OK! Now, you’re better equipped to tackle this important aspect of homeownership. Plus, you’re making a positive impact by supporting the important services to keep your community safe, clean, and a great place to call home.