Understanding your property tax

While it’s an added fee to your expenses year-after-year, it’s one that many many people don’t quite understand. Paying property taxes are a requirement for all Canadians homeowners. So if you’re considering purchasing a home, it’s something you’ll need to factor into your closing and yearly costs. 

What are property taxes?

Property taxes are the taxes you pay to the government based on your property value. These taxes vary across the country depending on what province or city you live in, as well as the type of property you own (a house’s property taxes are different from those of a condo). What some people don’t know is that in most provinces, your property tax amount actually consists of two parts: the municipal tax and the education tax.

The municipal portion of your tax varies by the city you live in and is determined by the municipal government. This tax helps with funding city projects and infrastructure like road and highway construction, water and sewage improvements, law enforcement, and any other services that help the community. Some cities may also add additional taxes for local infrastructure projects and urban planning. For example, the City of Toronto includes a city building fund levy that helps with funding for public transit and housing projects in the city. 

The education portion of your property tax is established by the Minister of Finance. This part is used to help fund the elementary and secondary provincial school systems. 

Who has to pay property taxes?

Simply put, if you own property in Canada or are renting a home, paying property taxes is a must for you. Renters might not realize it, but property taxes might be factored into your monthly rent as a cost for your landlord. 

How are these taxes calculated?

Each municipality in Canada determines its own annual property tax rate. This number typically can range from 0.5% to 2.5% of your property value. Your annual property taxes are calculated by multiplying your home’s value by the annual property tax rate. 

This rate does fluctuate year after year and is determined by the government. In addition to this, how often you have to pay your property taxes and how often they are assessed also varies by where you live in the country. In Ontario, property values are assessed by the government every four years. In Alberta, however, the government does an assessment every year. 

How to pay your property tax bill

When it comes to paying your property tax, you generally have two options. The first option is to pay your city directly. In this case, you’ll be mailed an annual property tax bill with monthly payment due dates. You’re then responsible for making these payments on your own online, over the phone, or by mail. 

The other option is to pay your property taxes through your mortgage. If you choose this option, your mortgage lender will add an amount onto your regular payments in order to cover your property tax. This option spares you from remembering your property tax deadlines, letting you fold them into payments you’re already making. 

If you’d like to consider adding your property tax bill into your mortgage or have questions about your options, Pine’s mortgage advisors would be pleased to help you out.