Mortgage Basics

How To Calculate Your Property Tax

How To Calculate Your Property Tax
Written by
  • Tvine Donabedian
| 17 April 2023
Reviewed, 31 August 2023
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    Property taxes are the taxes you pay to the municipality where your home is located. These taxes are then used to pay for the services in your area, from road and sewage maintenance and snow removal to schools and garbage collection. Knowing how to calculate this tax will help you prepare for this additional expense of owning a home.

    Key Takeaways 

    • Property taxes are the main revenue source for municipalities that use these funds to pay for road maintenance and snow removal, garbage and recycling collection, park and recreational facilities, libraries, and more. 
    • Official tax rates are usually finalized mid-year. Until this rate is determined, an Interim tax is collected based on 50% of the prior year’s annual property taxes. 
    • Property values are assessed regularly though the frequency will vary based on the province in which you reside. Your property’s assessed value is multiplied by the tax rate to determine the tax you will pay.

    First things First: What is Property Tax?

    Property taxes are a recurring expense that municipal governments collect from you as a homeowner, which pays for services run by the municipality. These taxes fund municipal-run services like garbage and recycling collection, parks and recreational facilities, libraries, public transportation, road maintenance, snow removal, and many more services, depending on where you live.  

    Suppose you live in an unincorporated area of Northern Ontario or outside a municipal boundary. In that case, the provincial government assumes responsibility for assessing and charging property taxes to help fund community services, known as a provincial land tax (PLT).

    What Goes Into A Property Value Assessment?

    A government-authorized entity assesses property values regularly, though the frequency usually varies by province. These property assessment organizations assess property values by analyzing what you paid for your property and its location, age, size, and sales of comparable properties in your neighbourhood. This gives them a current value assessment that will be used when determining how much property taxes you will owe.

    Property Tax Calculator

    Calculating property taxes is a relatively simple task. The taxes you will owe can be calculated by multiplying the assessed value of your property by the tax rate for the year in the municipality in which you live.

    How to Calculate Property Tax

    Suppose you have a detached home in Toronto, for example. In that case, the easiest way to calculate the estimated property tax is to take the assessed value (for this example, let’s say it’s $1,000,000) and multiply that by the total tax rate. Toronto’s tax rate is currently 0.631933%, comprising the city tax rate, city building fund, and education rate. 

    First, we will convert the percentage to a number:

    0.631933% / 100 = 0.00631933

    Then we can calculate the estimated property taxes:

    $1,000,000 x 0.00631933 = $6,319.33

    Estimated property taxes on a $1,000,000 home in Toronto would be around $6,319.

    Official Property Tax Rates

    Official property taxes are usually decided on an annual basis and are finalized mid-year. Municipal property taxes are the main source of revenue for municipalities and are highly regulated by provincial governments with strict budgeting restrictions. As a result of this, they must balance budgets accordingly compared to their yearly expenses. This is where property tax rates come in. By deciding on these rates later in the year, municipalities are given time to properly budget and account for how much or little revenue they must generate to make up for any shortfalls.

    Interim Property Taxes

    Interim property taxes allow municipalities to collect these tax revenues while they finalize their budget. This budget would include the official property tax rate decided for that year. These interim property tax bills are based on 50% of the prior year’s annual taxes. This amount is paid in the interim for the first half of the year and put toward the total property taxes owed for the year. 

    If the finalized property tax rate for the year ends up higher than the prior year – you will have to pay more in the second half of the year’s payments to make up the difference. If the final rate is lower than the prior year, the opposite is true – you will pay less in the second half of the year’s payments to make up the difference.

    What Are Property Taxes For Major Canadian Cities?

    Assuming we use $500,000 as a baseline home price, the average property taxes can look as follows across Canada:

    Montreal: 

    Montreal’s property tax is based on the home’s assessed value. Properties in Montreal are assessed every 3 years by the regional county municipality. The municipal tax rate comprises two parts: the municipal tax, which depends on the borough where the property is located, and an education tax set by the province, which is the same throughout Quebec.  

    To calculate what you will owe in Montreal on a $500,000 home:

    0.673600% / 100 = 0.006736

    $500,000 x 0.006736 = $3,368

    You should anticipate paying $3,368 annually in Montreal on a $500,000 assessed property. 

    Ontario:

    The Municipal Property Assessment Corporation, or MPAC, assesses properties every 4 years in Ontario. It’s important to note that this assessed value can vary significantly from the market value of your property. Ontario property tax is calculated using the MPAC-assessed value of your home and multiplied by the final property tax rate in the area where you reside. 

    In this example, we will calculate what you will owe in Kingston, Ontario, on a $500,000 home:

    1.399366% / 100 = 0.01399366

    $500,000 x 0.01399366 = $6996.83

    In Kingston, Ontario, you would anticipate paying $6997 annually on a $500,000 assessed property. 

    Vancouver: 

    BC Assessment assesses Vancouver’s property tax annually, which evaluates properties in British Columbia. Property values are recorded as of July 1st of the previous year, with assessment notices sent out at the beginning of each year. Taxes are calculated based on this assessed value and comprise the municipal portion, determined by the municipality, and a school tax, determined based on the number of residences and their respective values in your district. 

    To calculate what you will owe in Vancouver on a $500,000 home:

    0.269293% / 100 = 0.00269293

    $500,000 x 0.00269293 = $1346.47

    In Vancouver, you would anticipate paying $1,346 annually on a $500,000 assessed property. 

    Calgary:

    Calgary’s property tax is assessed annually based on guidelines set by the Alberta Assessment and Property Tax Policy Unit and the Ministry of Municipal Affairs. Taxes are calculated based on the assessed value, which comprises the municipal tax determined by the municipality and an education tax that differs based on the municipality. 

    To calculate what you will owe in Calgary on a $500,000 home:

    0.714980% / 100 = 0.0071498

    $500,000 x 0.0071498 = $3,574.90

    In Calgary, you would anticipate paying $3,575 annually on a $500,000 assessed property. 

    Frequently Asked Questions

    How much is property tax in my province?

    Property taxes vary by province. Every municipality across Canada has a separate annual property tax rate. One of the best ways to determine this rate is to check your municipalities website.

    How do I calculate my property tax?

    To calculate – use the assessed value of your property and multiply that by the tax rate for the year in the municipality in which you live. 

    How often do I have to pay property tax?

    Property taxes are paid either quarterly, semi-annually, or annually though this will vary depending on the municipality in which you reside. 

    What happens if I don’t pay my property tax?

    You may incur late fees if you don’t pay your taxes in time. If you miss too many payments, you could have a lien placed against your property, and the municipality may be given recourse to sell your property to recover the unpaid taxes.

    Final Thoughts

    Property taxes play an important role in keeping our communities running. From maintaining the roads you travel, to supporting vital services like community parks and libraries. Carefully planning and calculating your anticipated taxes for the year can help you better prepare and budget for this additional expense that comes with homeownership.