Property tax is a fee charged by municipal governments to help fund public services and amenities. The assessed value of a property, determined by the local assessment authority, serves as the basis for calculating the property tax amount. However, the rate at which property owners are taxed varies from community to community, as does how often these payments are required.
Understanding property taxes is important, particularly if you want to buy a new house. The location of a home can significantly impact the property tax rate, especially since these rates do change fairly frequently. Understanding how this tax is calculated can help you with buying decisions, planning budgets, and providing a general peace of mind.
We've created this guide to property tax so you can have all the information you need to feel empowered and make informed financial decisions.
Key Takeaways
- Property tax is a fee that municipalities charge all property owners.
- The assessed value of your property and the residential tax rate are the two main factors that determine your property tax amount.
- Vancouver BC has one of the lowest property tax rates at just 0.28%, while Brandon MB has one of the highest at 2.93%.
- You can either pay your property tax bill directly to the municipality or have it bundled into your mortgage payment.
How is property tax calculated?
The 2 main factors that determine what you pay for property tax are the assessed property value and the residential rate. Aside from these, the value of a city's real estate and the health of the housing market can have an effect. A thriving housing market with higher property values can generate enough tax revenue that the municipality is able to maintain a lower property tax rate.
Property values are regularly assessed by the government and consider various factors, such as size, age, location, and more. The residential tax rate will vary by municipality and is either expressed as a percentage or in "mills," which is the dollar amount of tax levied per $1,000 (usually) of the assessed property value.
Typically, the formula used to calculate property tax is:
Property Value Assessment x Municipal Tax Rate = Property Tax
So, if you live in a home assessed at $300,000 and your municipal rate is 0.5%, the calculation would work like so:
$300,000 x 0.5% = $1,500
Or, if you live in a city with a municipal rate of in mills, the formula could look like this:
(Assessed Value / 1,000) x Mill Rate = Property Tax
And with a property assessment of $300,000 and a mill rate of 1.08, your calculation would be such:
(300) x 1.08 = $324
Property tax rates for major Canadian cities
Here are a few examples of the various property tax rates in cities across the country. Most are expressed as percentages, but some are mills.
| Province | Residential rate by city |
|---|---|
| Alberta | * Calgary: 0.66% * Edmonton: 0.95% |
| British Columbia | * Vancouver: 0.28% * Victoria: 0.44% |
| Manitoba | * Brandon: 2.93% * Winnipeg: 2.64% |
| New Brunswick | * Fredericton: 1.9% * Moncton: 2.01% |
| Newfoundland and Labrador | * Corner Brook: 8.25 mills * St. John's: 0.83% |
| Northwest Territories | * Yellowknife: 4.37% |
| Nova Scotia | * Halifax: 1.12% * Truro: 1.9% |
| Nunavut | * Iqaluit: 6.15 mills |
| Ontario | * Ottawa: 1.17% * Toronto: 0.67% |
| Prince Edward Island | * Charlottetown: 1.67% * Summerside: $1.50 mills (per $100) |
| Quebec | * Quebec City: 1.02% * Montreal: 0.75% |
| Saskatchewan | * Regina: 1.46% * Saskatoon: 1.29% |
| Yukon | * Whitehorse: 1.08 mills |
It's surprising that while the Toronto property tax rate is particularly low at 0.67%, it's not the lowest on the list. That honour goes to the Vancouver property tax rate, coming in at just 0.28% and followed closely by Victoria at 0.44%.
At the other end of the spectrum is Yellowknife NT with a very high rate of 4.37%, followed by Brandon MB at 2.93%.
Surprised that cities like Toronto and Vancouver don't have sky-high rates? This is because homes there are pricier and more readily available than in other cities and, as earlier mentioned, this allows them to maintain a lower rate.
Exemptions and rebates you may be eligible for
Although, again, it varies by province and city, there may be property tax exemptions, rebates, or other forms of relief available for individuals in specific circumstances. For instance, there may be allowances for seniors or for persons with disabilities.
Here are a few examples of areas that offer some form of relief for individuals paying property taxes on their home:
- British Columbia provides a "Home owner grant for people with disabilities" and/or their spouse or relative living with them.
- Ontario offers an "Exemption for Seniors and Persons with a Disability" through the Municipal Property Assessment Corporation.
- Nova Scotia has a "Property Tax Rebate for Seniors" that provides eligible recipients with a sizeable rebate on their property tax.
Aside from these, exemptions are frequently provided to non-profit organizations, charitable organizations, educational institutions, heritage properties, and more.
How to pay your property tax
There are 2 main options for paying your property tax bill: paying through your mortgage or making the payment directly to your municipality. How often you have to make payments will depend on your city's regulations, but the options are usually either annual, semi-annual, or quarterly.
Choosing to pay your property taxes through your mortgage means that, technically, your lender makes the payments on your behalf. Each year, the lender will take the annual tax amount, divide it by 12, and add it to your monthly mortgage payment. This can be a convenient choice since it means you don't have to worry about remembering tax deadlines or any such details.
Sometimes, first-time home buyers or those making smaller down payments are actually required by their lenders to pay their property taxes this way. This is to prevent the homeowner from defaulting on their taxes and having a lien placed against the home.
The other choice is to pay the city directly, which means you send payment through the mail, do it over the phone, or go directly to a municipal office to take care of it. It's becoming more common for cities to offer online payment options as well.
It's not overly common for municipalities to allow property tax payments to be made via credit card, but you can always use a payment service like PaySimply that's linked to your card. Even if you're worried you'll forget to make the payment or want a set-it-and-forget-it type of system, using PaySimply is a solid choice. You can also use PayPal, Alipay, or even debit this way.
What does your property tax look like?
Just because all homeowners have to pay property taxes doesn't make it any easier to understand – or to make the payments at all. Hopefully, though, understanding what the tax is for and how it's calculated can ease tax payers' minds a bit.
What was your property tax bill like this year? Has this guide helped you to understand it a little better?
Let us know in the comments section below.
FAQ
What is property tax?
Property taxes are fees that property owners pay to the municipal government. Each community has its own unique tax rate, and the amount you're required to pay combines this rate with your individual property's assessed value.
What's the difference between assessed value and market value for a property?
A property's assessed value is determined by the municipality and includes factors like size, location, and any recent renovations or improvements made. The market value is what a property could sell for in current market conditions.
Is there an online property tax calculator I can use?
Yes, there are several online property tax calculators available so you can determine what you'll owe. A simple Google search should provide a few options for your area, but make sure it's using the correct tax rate for your community.
Which Canadian city has the highest property tax?
Of the cities we researched, Yellowknife NT has the highest property tax rate at 4.37% and Brandon MB's rate of 2.93% is significantly less but still high. Vancouver has the lowest rate, coming in at just 0.44%.
What is a property transfer tax?
A property transfer tax, or land transfer tax, is a one-time fee that buyers pay when purchasing a new home. Each province has its own way of calculating this tax, but it's usually a percentage of the property's value.
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