This article was written by RateHub.ca
The dawning of a New Year can only mean three things: New Year’s Resolutions, winter… and tax increases!? Yes, the cost of home-ownership just got a little more expensive in the City of Toronto, as homeowners will see a two per cent increase on their 2013 property tax bill.
What does this mean for homeowners?
First, you should know that Toronto homeowners could actually be facing a double-whammy of tax increases.
Late last year, MPAC (Municipal Property Assessment Corporate) mailed its 2012 Property Assessment Notices. The assessment included your home’s current value assessment (CVA), which is used to determine how much your property taxes will increase over the next four years. An increase in your home’s CVA doesn’t mean your property taxes will increase. If your home’s value increased at the average rate, you won’t face a tax hike from the reassessment. However, if your house appreciated at a higher rate, you’ll face a tax increase; and if your house appreciated at a lower rate, your taxes will actually decrease. For example, if your property’s value increased by 3.25 per cent, while the average in Toronto was 4.25 per cent, your property tax will decrease. However, if your property’s value increased by 5.50 per cent, you’ll face a property tax increase.
You should have also received your 2013 interim property tax bill in the mail, recently. Your property tax payments for the first half of 2013 are based on your 2012 annualized tax rate. So what does a 2 per cent tax increase look like? Well, if your 2012 annualized tax rate is $3,000, your 2013 annualized tax rate would be $3,060, an increase of $60 ($3,000 x 2% = $60). Property tax rates are set by cities all across Canada. Each year, municipal governments sit down and decide how much property taxes will increase. If you’re a homeowner, it’s important to budget for property tax increases each year. Property taxes are vital to our city – they help pay for public services like snow clearing, public libraries, and waste management.
What happens if I sell my house and still either owe property taxes or have prepaid them?
The statement of adjustments prepared by your real estate lawyer takes into account any property taxes you may have prepaid or still owe. For example, if you’ve prepaid your property taxes for the entire year and your house closes in July, the taxes paid from July 1, 2013 to December 31, 2013 will be credited in your favour. For example, if you prepaid $3,000 in property taxes, $1,500 (for the remaining 6 months) would be credited in your favour. If you still owe property taxes, it will be your responsibility to pay them, not the new homeowner’s.