February 9, 2023
One of the “fun” things about homeownership is property taxes. After all, who doesn’t love paying taxes? In all seriousness, although you probably don’t love paying them, they’re an inevitable part of homeownership.
Property taxes in Ontario are based on two values:
- The final tax rate which is generally comprised of two tax rates:
- The municipal tax rate based on the city’s overall budget and the comparative value of homes in the area
- The education tax rate which helps fund Ontario schools
- Property value which is assessed by the local government.
DETERMINING PROPERTY TAXES
Although some cities, like Toronto for example, may have additional tax rates used for things like improvements to the city’s infrastructure, they stay consistent with each individual city. The final determined tax rate for the city is then applied to the assessed value of the property. For example, London, Ontario's 2022 total tax rate was 1.422308%. If your home was assessed at a value of $500,000, you would have paid $7,112 in taxes last year.
ASSESSING THE VALUE OF THE PROPERTY
It’s important to note that an assessed value isn’t necessarily what you paid for your home. As Wowa.ca explains, “Every four years, the Municipal Assessment Corporation (MPAC) conducts an evaluation of properties all over Ontario and submits assessed values for each of them. This assessed value can differ significantly from the market value of your property.” In many circumstances, the assessed value is actually lower than what you paid for it, which is advantageous for you because it means you will pay less taxes than if they were based on purchase price!
When conducting their assessment, MPAC generally considers what similar homes are selling for in the area as well as 200 other factors that may impact property value. However, the five major factors that account for roughly 85% of determined property value are quality of construction, lot size, location, age of the property adjusted for renovations, and livable square footage.
Hopefully you now have a better understanding of how property taxes are calculated. If you would like more information on our local property taxes, here is a link to the London, Ontario municipality website: https://london.ca/government/property-taxes-finance/property-taxes
If you have questions about property taxes for a listing, one of our many experienced agents would be happy to help!
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