Property taxes are levied to homeowners as a way to help maintain services in your community that ensure your neighbourhood continues to thrive and remain an attractive place to live and work.
Property taxes represent a key source of funding for municipalities as they help pave the way for several important services including garbage, composting and recycling pickup, road maintenance, snow removal, parks and recreational facilities, libraries, public transportation and more.
Your municipality will send you a property tax bill annually, which you typically have the option of paying on a monthly, quarterly, semi-annually or annual basis. Payment frequency may also be determined by the municipality. You can often pay your taxes online, in-person at your financial institution, send by mail, via telephone banking or through pre-authorized bill payment.
Or, if you prefer, most lenders offer the option of tying your property taxes into your mortgage payments. This can be helpful – especially for first-time homebuyers – since your lender then takes on the responsibility of paying your property taxes to the municipality. This becomes one less ongoing deadline you have to worry about meeting.
Calculating property taxes
There are several factors that come into play when determining how much property tax you’re expected to pay each year such as your municipality’s budget, the assessed value of your property and its relative value compared of other homes in your area.
Formal property assessments are carried out in order to establish property values, which the government uses to establish the rate. That rate is then multiplied by your property value to determine the amount of tax you’ll be required to pay. Additional factors such as your property’s size, construction type, age and location can also affect the amount.
Property taxes generally have two components – a municipal tax and an educational tax:
- Municipal tax rate. Rates are established by your municipality and can vary depending on the type of property you own. Each year, municipalities assess whether tax rates need to increase in order to cover the services they’re used to fund. You can learn more about municipal taxes on your municipal government’s website.
- Educational tax rate. Rates are established in essentially the same way as municipal rates but, because public education is overseen by provincial governments, the rates are set by the province. Educational taxes are used to help fund elementary and secondary schools. Each year, provinces establish total educational funding requirements and properties are taxed accordingly.
If you live outside of a municipality, responsibility for your local services falls under the provincial government. As such, you’ll be required to pay what’s called a provincial land tax. These taxes are used for similar purposes as municipal taxes and are calculated in the same manner.
Many municipalities have offered additional time to pay taxes without penalties or accumulating interest changes in light of financial hardships due to the COVID-19 pandemic. Check with your local municipal office for full details. Keep in mind, however, that payment deferrals don’t reduce the amount of your taxes, just the time in which you’re required to pay them in full.
Have questions about property taxes or your mortgage in general? Answers are a call or email away!