In Canada, everyone has an opinion about property taxes. Whether city dwellers or rural folk, each side will argue that the other is not paying enough in property taxes, making for a heated and spirited discussion about levies on the residence you worked hard to purchase.
That said, aside from discussions over what the property tax rate should be, this is an important subject since many prospective homebuyers do not consider their annual tax bill as part of their ongoing expenses, whether they own a condominium or a single-family home, which could hurt their wallets in the future.
Planning for annual property tax payments is just as important as researching the rate on your mortgage or determining what your closing costs will be at the end of the home-buying process.
So, what do you need to know? We have compiled a guide for what you need to know about property taxes in Canada.
Property Taxes: What to Expect
Here are five things you should expect about property taxes in your housing market:
#1 Check the Rate in Your Area
One of the best ways to determine the property tax in your area is to visit the municipality’s website. Typically, the web portal will include a calculator and a list of rates. This will provide you with how much you can expect to pay using the Current Value Assessment of your property that the Municipal Property Assessment Corporation figures out.
#2 How to Pay Your Property Taxes
These days, there are many different routes you can take to complete your property tax payments. In addition, it has become a lot simpler these days, with municipalities finally catching up with the times.
Here are your payment options:
- Online banking
- Telephone banking
- Automatic teller
In some places, you can also pay by check.
Often, your mortgage lender will collect your property taxes from you with every mortgage payment and submit them to your municipality on your behalf.
#3 What Do Your Property Taxes Cover Anyway?
Every province or municipality uses revenues from property taxes to cover different needs. So, for example, in the province of Ontario, homeowners will pay property taxes each year to cover the costs of public education, infrastructure, garbage collection, snow removal, and public services (police, firefighters, ambulances, and more).
#4 Consequences of Not Paying
You are required to pay property taxes. There is no other way around it. While your residential property could be seized by the government and sell it to get back the tax revenues, this process is rarely utilized since it can take several years to complete.
But it does not mean the government will give up. Instead, you are generally charged 1.25 percent each month. If you do not pay this fee and the overall tax bill, the collection process begins. You may also have a lien placed against your home.
Some jurisdictions might register a Tax Arrears Certificate if you have refused to pay your obligations after a few years.
#5 Can You Afford Property Taxes?
When searching for a home, you will generally consider the sale price, the mortgage rate, interest payments, fees and charges associated with the mortgage, utilities, etc. But what about the property taxes? The total amount can be challenging to crunch in advance but knowing the percentage in your town or city can make the estimation easier to put together.
For example, the property tax rate is about 0.61 per cent in Toronto. So, if you own a $1 million home, you will be forking over a little more than $6,000 each year. Everyone’s situation is different, and life can come at you pretty fast. In other words, you should calculate this in your budget when you are in the market to acquire a new residential property.
And don’t forget, in Toronto, you will have to pay the municipal land transfer tax, which can climb all the way to four per cent for home purchases worth between $400,000 and $2 million. This is in addition to the Ontario provincial land transfer tax.
Get Ready for Property Tax Hikes?
In the aftermath of the coronavirus pandemic, provincial and municipal governments need to develop different revenue tools to refill the coffers, reduce deficits, and trim their debt totals. Nova Scotia introduced new property taxes for non-residents, Toronto has been pressured to raise its property taxes, and city councils are assessing various property tax schemes and hikes.
When inflation is high and Canadian real estate market prices continue to soar to the moon; public policymakers are generally hesitant to increase property taxes. But they might not have any other choice in the future if fiscal pressures become prevalent during the budget creation process each year.
Courtesy of REMAX.ca