It’s actually quite simple on the surface level - buy a property and naturally, you’d have to pay taxes for it and other associated fees.
But it can be confusing to grasp, especially if you’re a homeowner concerned about the property taxes you pay each year. To help you out, we outlined the fundamentals of Toronto property taxes and how to calculate yours.
What are property taxes?
Property tax refers to the tax you have to pay to your municipality based on the assessed value of your property. If you own a parcel of land or property, you are legally obliged to pay property tax.
There are two main parts of a property tax: municipal tax and education tax. The municipal tax depends on the municipality of the property while the education tax is the same throughout Ontario.
Since you’re living in the City of Toronto, you also have to pay additional taxes. This includes the City Building Fund Levy, which is allocated for housing projects and public transit in the city.
Another determinant of the tax you have to pay is the type of property you own. The major property categories are Residential, Commercial, Farmland, and Industrial.
What are the property tax rates in Toronto?
There are different values that determine the final percentage of your property tax.
As mentioned, you have to calculate the municipal tax rate, education tax rate, City Building Fund Levy. The total will determine your final property tax rate.
Refer to the table below to see the 2021 tax rates based on the property type. Note that the rates are subject to change once the City Council determines the tax rate-supported budget for 2022.
|Description||City Tax Rate||Education Tax Rate||City Building Fund||Total Tax Rate|
Once you get your total tax rate, you don’t have to pay it all at once. Every year, you can pay in as few as two installments.
But if you enroll in the Pre-Authorized Tax Payment Program, you can pay in as much as 11 installments in a year.
How are property tax rates calculated?
The Municipal Assessment Corporation (MPAC) evaluates properties throughout Ontario every four years. After the evaluation, they submit the assessed value for each property.
To determine your annual contribution, all you have to do is multiply the property tax for the year by the MCAP property assessed value.
You can refer to the table below for a sample illustration:
|Description||City Tax Rate|
|Assessed value of residential property||$698,801|
|Total Tax Rate||0.61%|
|Estimated property tax||$4,269.76|
One important thing to note on this calculation is that it’s not based directly on the assessed property value but relative to the municipal average. So, if your property doubles in value, that doesn’t always necessarily mean that your property tax will double as well.
What matters in the calculation is the change in the property values throughout the city, not yours alone. If the value of your property doubles but everyone else’s doubles as well, then your property tax will remain the same.
Also, the MPAC assessed value may differ from the market value of your property.
Do property taxes change?
Yes, they change every year but that doesn’t mean that they also increase annually. It all depends on the needs of the city at that time.
For instance, the property tax rates in 2018 were actually much higher than it was in 2021. And then from 2018 to 2020, the tax rates continued to decrease.
The same thing goes for the City Building Fund which is a relatively new addition to your total payment. It may increase or decrease based on whether the city needs more or less money than calculated.
Who pays property taxes?
Everyone pays property taxes in Toronto, whether they’re renting an apartment, owning a house, or running a business.
The property tax is more direct for homeowners because they have to pay the calculated total per year. Meanwhile, for apartment tenants, the property tax usually gets passed along indirectly through their monthly rent.
In most cases, tenants don’t exactly know how much they’re paying in property taxes. It’s also a different case if it’s a multi-residential building with seven and more units because it falls under a different classification.
As of writing, these types of buildings are taxed 3.1 times more than a detached home of a similar value. So, there are a lot of factors to consider here but the bottom line is, every Torontonian pays property taxes.
Toronto property taxes are a financial obligation necessary to fund many of the city’s ongoing projects. Help the city reach its goals by always paying your property taxes on time.