Property Taxes In Canada | Highest & Lowest by Province
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Owning a home comes with a series of financial responsibilities that you would have to fulfill. If you didn’t buy your home outright, then you would have to make mortgage payments and maybe even default mortgage insurance. There would also be occasional maintenance costs to keep your property in top shape.
In addition to all of these payments, there is another that is mandated for every homeowner whether they purchased via mortgage or outright. Matter of fact, failure to pay would be an outright violation of mortgage terms. This charge is the Canada property tax. So, what is property tax?
- Property taxes are paid either quarterly, semi-annually, or annually depending on the municipality and your payment is determined using the assessed value of your home
- Rates may vary from year to year but typically range between 0.5% to 2.5%
- When comparing city to city, one with a higher tax rate may pay a lower sum than the other with a lower tax rate as a result of average home prices in that city
Are you a first-time buyer?
What Are Property Taxes?
Property tax in Canada is a financial obligation imposed on property owners by provincial, municipal, and local governments to fund public services. The tax is assessed annually and is based on the value of the owned property. Different regions have varying tax rates.
Compared to the other two tax types (income tax and sales tax), property tax is unique in that it is tax paid on an asset rather than financial flow. To determine the amount to be paid, the value of the property is considered rather than the owner’s equity.
Types of Taxes Homeowners Can Expect to Pay
Now, what are the types of property taxes that Canadian homeowners should be aware of? Let’s delve into the details.
Land Transfer Tax: When you purchase a property and the title is transferred to your name, you’re liable to pay a Land Transfer Tax. This is a one-time payment, usually due at the time of closing the sale. The amount varies based on the property’s purchase price and location. Here’s a handy LTT calculator to help you estimate your tax obligations.
Harmonized Sales Tax (HST) is a combined federal and provincial sales tax applicable on the purchase of new homes or substantially renovated properties. Unlike LTT, HST is not a one-time payment and is due annually.
Capital Gains Tax: If you sell a property at a profit, the profit is considered a capital gain, and Capital Gains Tax may apply. However, CGT is usually exempted on the sale of a primary residence.
Non-Resident Speculation Tax: Foreign buyers purchasing residential property in certain regions of Ontario are subject to NRST. This is a one-time payment, meant to manage foreign speculation in the property market.
Underused Housing Tax: This is a fairly new tax, introduced to discourage homeowners from leaving their properties vacant. If a property in certain Canadian cities is not occupied for more than six months in a year, the owner might have to pay an Underused Housing Tax.
How Does Property Tax Work in Canada?
Property tax in Canada is based on three main components:
- City tax: This tax is meant for funding local municipal services such as waste management, public transportation, and emergency services.
- Education tax: A portion of your property tax goes towards funding the public education system in your province or region.
- City building fund: This is a special levy for infrastructure and capital projects in the city.
The amount of property tax you pay is determined by taking the assessed value of the property and then multiplying it by the tax rate.
Municipalities all through the country carry out assessments once a year and then set a property tax rate. This usually ranges between 0.5 and 2.5%. In essence, property taxes are not exactly determined by property size. The market value of your home, which may typically vary from year to year as a result of other properties around, is then multiplied by your municipality’s property tax rate.
For instance, if your home has a market value of $400,000, and the municipality tax rate is set at 1.45%, then your property tax would be:
$400,000 (market value of the home) x 1.45% (property tax rate)
= Property taxes: $5,800
You would be required to pay $5,800 in property taxes that year.
It is important to note that ability to pay is not factored into calculating property taxes, and this can become a burden for homeowners.
Provinces + Cities Ranked By Property Tax
This table details property tax by province and city in Canada. If you are wondering how much is property tax or what is the average cost of property taxes, this table provides the information you need:
|Provinces||Residential Tax Rate||Taxes for your home’s assessed value of $250,000||Taxes for your home’s assessed value of $500,000||Taxes for your home’s assessed value of $1,000,000|
|Newfoundland & Labrador|
The table above shows that British Columbia is the province with lowest taxes. So, if you are looking for the lowest property taxes in Canada, this province is your best bet.
Quebec property tax is relatively low as well compared to New Brunswick which has the highest property taxes in Canada. Property tax rate comparison shows that property taxes in some provinces are more than 2 times that in other provinces.
Ultimately, it is somewhat difficult to estimate typical property tax except the province is known. The average property tax rate is also determined by province.
Property Taxes Will Vary from City to City
Within the same province, property taxes also vary city to city. Vancouver, BC has the lowest property rate at 0.24683% which is half the next best rate– Abbotsford, BC at 0.51300%. Cities in British Columbia generally rank as those with the lowest property rates.
However, a low tax rate does not necessarily translate to lower tax payments especially if house prices are higher on average.
For instance, Toronto’s tax rate of 0.599704% is equivalent to about $12,437 in the way of property taxes going by the average price of Single-Family Detached homes ($2,073,989) as of February 2022. This answers how much is property tax in Toronto.
On the other hand, Edmonton’s tax rate is at 0.86869%, which is about 1.4 times Toronto’s. However, average home value is around $493,543 as of February 2022, translating to only $4,287.35 in property taxes.
Similarly, Montreal property tax rate is higher, but the actual sum is lower as a result of the average price of homes.
This disparity can be found in various cities, and if you are wondering how much is property tax in Ontario, it follows the same pattern. Property tax rates Ontario are relatively low, but upon calculations, the actual sum turns out to be quite substantial. The average property tax in Ontario is relatively higher compared to other provinces.
How to Pay Your Property Taxes
The frequency of property tax payments can vary by municipality. You can pay your property taxes:
Directly to your municipality: In this case, you receive your property tax bill by mail and typically have the option to pay by phone, mail, or online. Since payment is not automatic, you have to make sure that your property taxes are paid on time. Setting up pre-authorized payments with your financial institution is also recommended.
Through your mortgage: In this case, your lender makes the required payment for you by adding a fee to your monthly mortgage payments. The annual property tax owed is divided by 12 and added to your monthly mortgage payments.
Frequently Asked Questions
What city in Canada has the highest property tax?
The city with the highest property tax is Winnipeg, Manitoba at 2.6439%.
What city in Canada has the lowest property tax?
Despite being home to one of the most expensive real estate markets in the country, Vancouver, British Columbia has the lowest property tax in Canada
What happens if you don’t pay property tax?
If you are unable to pay property taxes, you need to contact the Canada Revenue Agency and let them know, sooner rather than later. They might help you with different payment options and may even set up an alternative payment schedule for you. Otherwise, you might be subject to collection actions from the provincial government.
Are property taxes deductible?
In some cases, yes. For rental properties, you can claim up to the entire amount of your property tax for that property or based on how long the property was rented out that year. Another way to claim a portion of your property taxes is if you work from home and use part of your home for business purposes.
Property tax in Canada is a tax imposed on property owners to fund essential municipal services such as road repair, public schools, and emergency services. This tax is based on the assessed value of the property and varies from one municipality to another. The responsibility of paying this tax lies with the property owner, which is why it’s so important for potential homeowners to understand this tax and factor it into their budget. And as always, consulting a mortgage expert can provide a comprehensive understanding of these costs and implications on your mortgage payments.
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