Property tax is a recurring fee municipal governments collect from homeowners. Property tax rates vary by community, and are based on assessments of the market value of land or a building, often a residential home.
How property tax works
If you own any type of real estate in Canada you are required to pay property taxes directly to the municipal government.
Property taxes are one way that local governments generate revenue. They are collected by local governments from residential, commercial and industrial property owners.
Property taxes are used to pay for a range of public services in the community, including police and fire stations, schools, roads, garbage collection, snow removal, sewers and more.
What is included in property taxes and how often they are paid will vary by municipality. Payments might be made annually, semi-annually or quarterly. Your property tax bill may include a breakdown of where your money is going. For example, in Toronto, the overall property tax includes three different fees.
- City tax.
- Education tax.
- City building fund.
» MORE: Understanding land transfer taxes
Canadian property tax rates
Individual property tax amounts are calculated based on how much your house is worth and the municipal property tax rate. Property values are typically assessed by a government authorized entity on a regular basis, but the frequency of those assessments varies by province. In Ontario, for example, assessments are carried out once every four years; in Alberta they happen every year.
Every municipality across Canada determines its own annual property tax rate; contact your municipality or visit its website to see your current rates.
Typically, property tax rates range from 0.5% to 2.5%. The size of your property, what you paid for it, and your income play no role in how much you will pay in property taxes.
Examples of some 2022 municipal property tax rates in Canada:
|City||2022 Residential Tax Rate|
Calculating your property taxes is fairly straightforward. If you have a home in Ottawa, for example, and its market value is $500,000, you would multiply $500,000 by the current residential tax rate (1.14%) to get $5,700, which is approximately how much you would have to pay in property taxes for the year.
For the most current information about tax rates in your province, territory or city, consult your local government website.
How to pay your property taxes
How often you have to pay property taxes will vary by municipality. When it comes to actually paying those taxes, you will typically have two options.
Pay the municipality directly
If you choose to pay the municipality directly, it becomes your responsibility to pay your property taxes on time. You will receive a property tax bill by mail and will typically have the option to pay by phone, mail or online. You may also be able to set up pre-authorized payments with your financial institution.
Pay your property taxes through your mortgage
If you choose to pay your property taxes through your mortgage, your lender makes the required payment on your behalf and then adds a fee to your mortgage payments. To do this, your lender will take the annual property tax owed, divide it by 12, and add that amount to your monthly mortgage payments.
In some situations, homeowners have no choice but to combine their property taxes with their mortgage. This may happen if you have less than 20% equity in your home (due to making a smaller down payment) or are a first-time homebuyer.
In these instances, the mortgage lender will most often require that you include the property taxes with your mortgage as a form of protection on their behalf. Lenders want to ensure that you don’t default on property taxes, which could result in a lien against your home.
If you can’t pay your property tax
If you are having difficulty paying your property taxes, get in touch with the Canadian Revenue Agency. They can help you find a payment solution. You may be able to set up partial payments or come up with an alternate payment schedule.
Be sure to reach out for help sooner rather than later. If your property tax payments become significantly delinquent, the province could initiate collection actions, which could negatively affect your credit rating.
Programs and incentives like the Greener Home Grant can help you pay for upgrades and retrofits that make your home more efficient.