All You Need to Know About Property Taxes
Did you know that property taxes are based on the appraised value of the home, which may not be related to the owner's income? As a result, low-income families pay a disproportionate share of their total annual income in taxes compared to high-income families. Additionally, property taxes are increasing significantly in Canada due to rising property prices. Considering this property taxes may be the most important cost to consider when buying a home.
That's why we are here today to give you a better understanding of what property tax is and how it works so you can be well-informed and prepared when you buy your dream home.
What is property tax?
Simply put, property tax is the amount you have to pay to the government based on the value of your property. It is important to note that this amount may vary depending on the area where you live. For example, the highest property tax in Canada is in Quebec, where it is 1.9%. The lowest property tax in Canada is in Alberta, where it is 0.5%.
The property tax in each province has two parts:
This is the largest part of the tax, accounting for almost 60-70% of all income. It plays a vital role in supporting various urban projects and infrastructure projects, such as building roads and highways, improving water and sewage systems, supporting law enforcement efforts and providing essential services that benefit the whole community.
This portion represents approximately 20-30% of property taxes and is used to pay for public education in the city. This includes funding for schools, colleges and other educational services.
How is property tax calculated?
Property taxes in Canada are calculated by multiplying the property's value by the property tax in that municipality. If we were to give you a formula, it would look like this.
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Property Tax = value of the property X tax rate
For example, if a property has an assessed value of $1 million and the property tax rate is 1%, the property tax bill would be $10,000.
However, assessed value and tax rates aren't the only factors that affect how much you pay in property taxes.
Property tax is paid on January 1 of each year. If you don't pay your property taxes, you will be charged interest and penalties.
How do I pay my property taxes?
To pay your property tax, you have two options:
Paying directly to the city:?Your city will send you an annual property tax bill that details the due date for monthly payments. It is your responsibility to pay these fees directly to the city. This can be done easily online, by phone or by mail.
Paying by instalments through mortgage:?Alternatively, you can choose this method, where your lender will add the tax amount to your regular payments. By selecting this option, you will not need to remember the different property tax dates because they will be included without problems in the payments that you have already paid for your mortgage. This method is easy and simplifies the process of managing your tax duties.
In Conclusion
Finding the right balance between having a beautiful home and minimising property taxes can be a difficult task. However, there are effective things that can be done to reduce the burden without compromising the lifestyle. First, avoid making major changes before the property is assessed, as this can lead to a higher tax assessment. Additionally, comparing property taxes to neighbours with similar properties can reveal tax abatement opportunities. By being proactive and knowledgeable, homeowners can find ways to reduce their property taxes, make it easier to manage and improve their financial well-being.
Source: The Canadian Home