When in the market for real estate, the home’s price is typically top of mind for buyers. However, the carrying costs for a property, such as utilities, city services, and taxes, are often overlooked.
Property tax in particular tends to be forgotten by buyers, especially those caught up in fraught bidding wars for MLS listings in Toronto – but the amount you’ll pay annually in property tax should absolutely be considered when assessing your overall home affordability. And, because the rate homeowners are taxed varies between municipalities, some will shell out a lot more for it each year than others.
How is Property Tax Calculated?
First, it’s important to understand how your property tax rate is determined. For those who live within a municipal boundary, property taxes are made up of three elements:
– The assessed value of your home, as determined by the Municipal Property Assessment Corporation (MPAC). This is calculated every four years (the current assessment is from 2016, and the next is slated for 2020), and factors in your home’s specific condition, features, location, and any other amenities. For example, whether your home has a pool, sizeable lot, or finished basement will be part of MPAC’s consideration.
– The Education Tax Rate, as charged by the Province of Ontario. The proceeds of this levy are used to fund programs and repairs at nearby schools
– The Residential Tax Rate, as established by the municipality’s city council, based on the amount of revenue they’ll require to cover their annual budget.
If you live outside the confines of a municipality in an area that’s considered rural, you’ll instead pay the Provincial Land Tax, the rate of which is set by the province.
Property Tax Differs from City to City
Because these factors can vary so widely, so too does the property tax rate across the GTA. For example, the City of Toronto has kept its residential tax rate close to that of inflation in recent years, in the range of 0.6 per cent, meaning those in the 416 pay the least amount of tax, whether for a detached home in Rosedale, or condos in downtown Toronto.
In comparison, Oshawa and Orangeville are taxed at the highest rate, at 1.40690 per cent and 1.40990 per cent, respectively.
To illustrate how property tax can impact home affordability, Zoocasa calculated the amount a homeowner would be taxed, using their municipality’s residential tax rate, and the average of a home in their region, based on the June market report from the Toronto Real Estate Board. It should be noted that this sample calculation ues average home price rather than MPAC to reflect current market conditions; in actuality, a homeowner’s property tax amount will likely be lower, as their MPAC will be based on the 2016 assessment.
Check out the infographic below to see how property taxes differ across the GTA, based on the average home price: