Property tax explained: how your bill is calculated

Property tax pays for local services such as schools, roads, policing and garbage collection. It is a recurring cost of owning a home, and it varies a great deal between cities.

The short version: your tax is your home's assessed value multiplied by the tax rate. The assessed value may differ from what your home would sell for, and you can usually appeal it.

How it is calculated

The calculation is simple in principle: assessed value multiplied by the tax rate, which is often expressed as a percentage or in mills per dollar of value. One mill is $1 of tax for every $1,000 of assessed value, so a rate of 9 mills is 0.9%.

Who sets the value

The assessed value comes from a provincial or municipal agency, such as MPAC in Ontario or BC Assessment in British Columbia, and may not match what the home would sell for today. Assessments are updated on a schedule that differs by province, and in some provinces values are frozen at an earlier date. A newer home may be assessed higher than a similar older one if the older assessment is stale.

Who sets the rate

The tax rate is set each year by the city and other bodies, based on their budgets. The bill often includes a municipal part and an education part. Rates differ widely across cities, and so do the services.

How and when you pay

Bills are usually paid in installments, or monthly through your mortgage payment if your lender collects it. When you buy, the seller and buyer split the tax for the year at closing.

Example

An assessed value of $500,000 and a combined rate of 0.9%.

• Annual tax: $4,500.
• Monthly: $375.
• A different city with a 1.4% rate would charge $7,000 for the same value.

Appeals

If you think your assessment is wrong, you can usually appeal within a set deadline. Compare your assessment with similar homes nearby. A successful appeal lowers the value used for the tax, not the tax rate. Check your notice for the deadline, which varies by province.

Help for some owners

Some provinces and cities offer deferrals or credits for seniors or low-income owners, and some offer rebates for energy upgrades or heritage properties. Ask your municipality.

New builds and changes

A new home may be reassessed after you move in, with a supplementary bill. Renovations and additions can raise the assessment.

Why it matters when you buy

Check the actual tax on any home before you buy, since it affects your budget and your mortgage qualification. Lenders include it in your GDS ratio. Our Mortgage Simulator lets you enter it in your costs.