Our First Home: Paying property taxes

Our First Home: Paying property taxes

Home ownership in Canada requires property owners to pay municipalities fees for owning property called property taxes. Property taxes help finance various publicly-funded services used within your city.

 

Who pays property taxes?

Anyone who rents or owns property in Canada pays property taxes. When tenants (renters) pay property taxes, landlords add the taxes to their monthly rent. Homeowners receive and pay their property tax over the course of a year.  Tenants pay higher rates because they pay a different rate.

 

Why do I have to pay property taxes?

Paying property taxes ensures that services used by everyone in your city remain accessible and operational.

 

How much will I have to pay in property taxes?

Unlike sales taxes, property taxes aren’t a one-size-fits-all charge. federal income taxes either. Your city determines how much you’ll pay. The federal and provincial governments don’t set property tax rates. This is because different cities require different operating budgets.

 

When determining property tax rates for a given year, your city first considers how much it needs to raise for its annual budget.

 

Since cities can’t run on a deficit, the rate changes year after year in accordance to the budget. The city compares your home’s market value to others in your area. You’ll typically pay a tax rate between 0.2-2.5%.

 

A nationwide reassessment by the MPAC follows every four years and takes your home’s value, age, construction quality, lot size (if applicable) and living area space all into consideration.

 

After the MPAC conducts the assessment, your city/municipality receives data on properties across the city. Property tax rates will update as necessary.

 

Can you show me what a property tax calculation looks like?

Let’s say you own a home worth $475,000 in Toronto. How you can figure out what you’ll pay in taxes is by taking the value of your home and multiplying that by your city’s total tax rate for residential properties. Depending on which city you live in, your rate can be higher or lower.

 

$475,000 x 0.6879731% = $3,267.87

So in this case, you’ll be paying $3,267.87 in property taxes over the year.

 

Property Tax Adjustments

If the seller prepays your property tax, you must refund the amount they’ve paid. The amount you refund is only until your offer officially closes.

 

Let’s assume that the Toronto home is closing on October 20th. The seller paid the full property tax balance on January 20th of this year. The adjustment payments result in the following calculations:

 

$3,267.87 /365 days x 72 days remaining in the year

= $644.62

 

If you buy this property, you’d have to pay the seller $644.62 as a property tax reimbursement.  

 

Why don’t condo owners pay multi-residential property taxes?

Multi-residential property tax rates don’t apply to condo developments in most cities. This is because condo buyers own their units and pay mortgages on them, just like detached home owners would.

 

The multi-residential rates apply to residential rented properties, such as apartment buildings.

 

How can I pay my property taxes?

You can pay property taxes in two ways: through your mortgage in installments or directly to your municipality.

 

Contact your lender to arrange incorporating your property tax into your mortgage payments. Alternatively, contact your city’s directory to find out how you can pay your taxes. Most cities allow online payments, but you can make your payments in-person or by cheque.

 

What else should I know about property taxes?

  • You have to pay property taxes for as long as you own your home

  • Your tax rate can increase or decrease depending on how much your city needs 

Ultimately, your property tax payments help make improvements to the city you live in – and that’s always a good thing.


                            

Visit LOANERR.CA for more on Paying Property Taxes

 

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A Maryland native and Toronto-area transplant/graduate of the University of Toronto, Christine is a content writer at Loanerr. When not writing articles, she's an avid swimmer, cat lover, violinist in a indie band, and a humble food aficionada.