Property tax raises revenue to fund different municipalities of the local government. Almost 25 percent of the property tax revenue is used to fund education in Ontario. As there are many responsibilities of the municipal finance department, certainly property taxation is one of the most important – not the least. The reason being that it provides the biggest source of revenue for municipalities.
Municipal governments are responsible to provide services like water & sanitation, garbage collection, snow removal, fire protection, and policing. Local governments in Canada impose such taxes on residential, commercial, and industrial properties on an annual basis and they have the mandate to collect property taxes directly from homeowners across the country.
If you own a property in Ontario, you need to pay property tax every year on municipal services you receive from your municipal government. If your property is located within the jurisdiction of your municipal government, you will pay property tax. If your property does not fall under the jurisdiction of your municipality, the provincial land tax is the property tax that you will pay to the Provincial Land Tax Office.
Property Tax Calculation
The calculation of property tax payable is quite simple but the implementing mechanism behind this calculation can be challenging. Property tax payable is calculated based on the Assessed Value of your property multiplied by the tax rate as below:
Suppose the assessed value of your property is $200,000 and the tax rate in your municipality is 1.5%, your property tax payable would be $3,000.
Property tax is primarily calculated on the following determinant factors:
- Municipal Tax Rate
- Education Tax Rate
- Property Value
Municipal tax rate
It is a prerogative of the municipality to decide how much they want to raise funds from property taxes. Municipal tax rates are decided by your municipality and can vary, depending on the type of property you own. If you want to learn more about municipal taxes, you need to contact the Finance or Treasury department of your Local Municipality.
Education tax rate
What would be the education tax rate is decided by the provincial government and all residential properties in Ontario are subject to the same education tax rate. The funds which are generated from the Education taxes are used to support elementary and secondary schools in Ontario.
It is the Municipal Property Assessment Corporation (MPAC) who determines the value of your property and your property value is shown on a property assessment notice that you receive from MPAC. The value of your property is also mentioned in your annual property tax bill. In Ontario, MPAC re-evaluates all properties every 04 years to ensure greater stability and predictability.
Property tax Amount
You will receive a tax bill for your property on an annual basis and how much you need to pay for your property tax will depend on the two points which are mentioned below:
- What is the budget of your municipality that will decide how much to impose on property taxes?
- The relative value of all properties in your municipality, compared to the value of your property
The local municipality is responsible for preparing the tax bill of your property and also responsible for deciding when this tax bill is due on your property and when to send it to you. Property tax bills are standardized across all municipalities to make sure property owners get a clear and concise summary of what they are responsible for paying.
You have to rely on MPAC for the assessed value of your property but if you disagree on the assessed value of your property with the assessment value that MPAC has made for your property, you may submit a Request for Reconsideration free of charge. You may also file an appeal with the Assessment Review Board.
Sohail Afzal, CPA, CMA, MBA
Sohail Afzal, (CPA, CMA, MBA) is the founder & CEO of GTA Accounting Professional Corporation. He is a highly experienced Chartered Professional Accountant and businessman himself and understands the challenges that many businesses face when it comes to cash flow management. As an experienced business consultant & tax advisor, he is helping companies grow by providing the technical, financial, and contractual information necessary for strategic decision-making.