What is Property Tax?


Real Estate News / Monday, July 30th, 2018

By: Zoocasa

Property taxes are an important consideration for home buyers, as this levy is a carrying cost that must be paid each year, and will increase or decrease along with the home’s value.

These taxes are collected by the municipality in which you live, and are used to fund a number of infrastructure and service needs at both the city and provincial level; in fact, property taxes account for $19 billion dollars in revenue for the province of Ontario.

Property taxes are comprised of three main elements:

  • Your assessed home value: this is determined every four years by the Municipal Property Assessment Corporation (MPAC) and takes into account comparable homes in your area as well as your home’s specific features. For example, if your home has recently been upgraded with new features like a new basement or pool, will all factor into your assessment.
  • The Education Tax, which will go towards funding school boards across Ontario.
  •  The Residential Tax Rate, which is determined by your city council and based on how much funding is needed to meet its budget requirements.

Property Taxes Vary Based on Your City

Moreover, the property tax rate may vary widely based on the municipality you live in, as some cities tax at a higher rate based on various factors like population, infrastructure needs, and political motivation. Because property taxes go into supporting municipal services, such as police and emergency services, parks and recreation, social programs, and transit, the rate will depend heavily on the spending needs that year.

In areas that are considered to be rural and outside of the jurisdiction of a city, town, or village, the property taxes will be set by the provincial government.

GTA Cities with the Most Property Taxes

Because property tax rates are dependent on a city’s needs, some homeowners may pay a significantly higher rate than those in neighbouring cities. For example, owners of Toronto houses, where city council opts to keep the rate at or below inflation, pay the lowest tax rate in Ontario at 0.63 per cent.

Because MLS listings in Toronto can vary widely in value, the amount paid ranges across the city. For example, assuming their homes were assessed at the MLS district’s average home price of $771,830, residents of Toronto East would pay $4,905 each year in property taxes, while Toronto West residents can expect to pay $5,019 annually based on an assessed home price of $789,739. Homeowners in central Toronto would pay the most property tax, based on an assessment at the average home price of $966,088, equating to $6,140 per year.

To find out how property taxes differ, Zoocasa calculated the average amount of tax paid, based on the city rate and average home prices, in each region of the GTA. Check out the infographic below to see how property taxes vary across the region.

greater-toronto-property-tax-rates-zoocasa-updated

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