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<\/a>Photo:\u00a0Bart Anestin<\/a>\u00a0on\u00a0Unsplash<\/a><\/em><\/p>\nHow is your property tax calculated?<\/h2>\n
Every municipality has an established tax rate. To determine what your property tax will be for the year, you apply the tax rate to your assessed property value. In Ontario, the Municipal Property Assessment Corporation (MPAC) assesses the property \u2014 considering the property age, size of the home and lot, location, construction quality, and how it stacks up to average property values in your municipality. They release new assessments every four years, with the next one scheduled to land in your mailbox in 2020.<\/p>\n\n
If your property is $500,000 and the tax rate is one percent, you will owe $5,000 that year. Aside from Toronto, each municipality in the GTA has both a local and regional government (for example, Oshawa is local, Durham is regional)<\/span>, which set two tax rates. Every municipality also has an education tax rate lumped into the total.<\/p>\n If the value of your home increases dramatically, MPAC uses what\u2019s called a \u201cphase-in program,\u201d to protect homebuyers from getting a shocking sticker price when the next assessment rolls around. Instead, the value is gradually phased each year until it reaches the full assessed value. If the value of your home drops, your assessed value will drop with it \u2014 along with your property taxes.<\/p>\n However, it\u2019s important to note that changes you make to increase the property value of your home will not necessarily result in increased property taxes. MPAC gets the figure by comparing it to the average property in the municipality. It\u2019s not about whether or not your individual property rises or falls, but rather, how much it\u2019s rising and falling in relation to other properties throughout the city. Say your condo doubles in value, but so has every other condo in the city \u2014 your property taxes will stay the same. But if your property value goes up greater than the average, property tax follows suit. On the other hand, if your property value rises, but at a rate lesser than the average, you will actually pay less tax.<\/p>\n In the same way we budget for holidays, housing and gym memberships, the government also has a budget, albeit, a much more complicated one. To balance our personal budgets, we can pick up side hustles, get a promotion, spend less or receive a financial gift. The government, on the other hand, uses taxpayer money managed through the budget process.<\/p>\n \u201cThere are two budgets,\u201d explains Amborski. \u201cThe operating budget, which deals with the day-to-day expenditures \u2014 wages, salaries, maintenance and so on. And then there\u2019s a capital budget for anything with a life longer than one to five years \u2014 infrastructure, buildings, roads and so on. Municipalities must strike an operating budget so that planned expenditures equal planned revenue. They can\u2019t budget for a deficit. So at that point, they have to determine a tax rate they\u2019re going to collect to meet their obligations for that year.\u201d<\/p>\n Relative to other municipalities, Toronto actually has a very low property tax rate. Amborski\u2019s colleague Frank Clayton from the Centre for Urban Research and Land Development, released a report arguing Torontonians could stand to have property tax increased by as much as 20 percent and still be in the median. Clayton looked at 29 municipalities and ranked Toronto sixth-last (in 2016, the average property tax bill was $4,027). Compare that to King, a township in York Region north of Toronto, which ranked first and had an average property tax bill of $6,798.<\/p>\n Toronto mayor John Tory has kept the tax rates at the rate of inflation but this can be problematic. \u201cPart of the problem is it doesn\u2019t give you much room to enhance your expenditures,\u201d explains Amborski. He argues that by simply raising your property taxes based on the rate of inflation, the city can only keep its head above water. \u201cIt doesn\u2019t give you much room to provide enhancement to quality of services or to invest in more infrastructure. The City of Toronto has been reluctant to raise taxes. \u201cIt\u2019s very typical among politicians, of course. It relates to people getting reelected.\u201d<\/p>\n On the flip side, if you look at the commercial tax burden in Toronto, it\u2019s much higher. \u201cRetail properties in 416 pay higher property taxes than those in 905. For example, if you go along Steeles, which a boundary between York Region and Toronto, you\u2019d see very different tax burdens on the two sides of Steeles Avenue.\u201d<\/p>\n Anytime you buy a home in Ontario, you have to pay land transfer tax. If you\u2019re in Toronto, you get dinged twice \u2014 paying the province\u2019s land transfer tax, but also a municipal land transfer tax. This can easily cost you tens of thousands of dollars. The tax rate applied depends on the value of the property.<\/p>\n In Ontario, the following rates are charged according to the value of the property:<\/strong><\/p>\n In Toronto, you also have to pay the following tax rates according to property value:<\/strong><\/p>\n To illustrate this, let\u2019s say you purchase a condo for $500,000. The taxes are calculated on a marginal basis, so this is where some semi-complicated math comes in.<\/p>\n That\u2019s $12,950, my friends! If you’re not in the mood for all that math, you can always use a handy online land transfer tax calculator<\/a>.<\/p>\n Why did the government do this, you ask? \u201cThe city was looking for revenue tools with the new City of Toronto Act, where they were given broader taxing authority,\u201d explains Amborski. \u201cThey were looking for a way to raise money \u2014 I would argue \u2014 without raising the property tax. They went into land transfer tax and the market started to boom. Now, it would be hard to replace.\u201d<\/p>\n There have been questions about whether or not it\u2019s a fair tax. \u201cI would have rather seen, back then, property tax increase,\u201d says Amborski. \u201cWhen people pay their property tax bills, they write out a cheque and make the councillors accountable for that money. Whereas, with land transfer tax, councillors aren\u2019t as accountable \u2014 that money just comes in.\u201d<\/p>\n Thankfully, there is a land transfer tax rebate for first-time homebuyers equal to the full amount of their land transfer tax, up to a maximum of $4,000 to help offset the cost. There is also a rebate to cover Toronto Land Transfer Tax for first-time buyers \u2014 equal to the full amount of their municipal land transfer tax, up to a maximum of $4,475. Curious about other tax breaks and rebates you get for being a homeowner in Ontario? We wrote a complete guide.<\/a><\/p>\n<\/a>Photo:\u00a0Clem Sim<\/a>\u00a0on\u00a0Unsplash<\/a><\/em><\/p>\nWhy do tax rates change?<\/h2>\n
<\/a>Photo: James Bombales\u00a0<\/em><\/p>\nWhat about Land Transfer Tax?<\/h2>\n
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\r\n SEE ALSO:<\/span>The complete homebuyer\u2019s guide to property tax breaks and rebates in Ontario<\/a><\/strong>\r\n <\/div>\n