August 30th 2021
The State of Property Taxes in Toronto
By Jaswantee Ravi
When Canadians looks at the Toronto housing market, they are filled with uncertainty. With housing prices increasing 10% within the last year and average home costs reaching $1 million, many Canadians are confused about what to do and where to go. Although the housing market in Toronto is less than ideal, property taxes in Toronto are the lowest in all of Ontario for a population of its size.
With that being said, just because Toronto property taxes are low doesn't mean that it is beneficial to a new home buyer. Property tax affects many things within a community, including city services like public transit, fire departments, police, and security, and schools. Property tax is a tree with many branches that stretch out, affecting many parts of a community, so it is no wonder why Canadians know so little about it since it is so large and convoluted. Considering the crucial changes in Toronto within the last year, here is the state of property taxes in Toronto.
Defining Who and What is Affected
All property owners have to pay property tax, and that is the law in Canada. Property tax is calculated through the estimated value of a property. By paying property tax, government and city services receive money to help operations and can be more effective in areas if the property tax is high. The Municipal Property Assessment Corporation (MPAC) calculates the property tax every four years by multiplying the current year's property assessment value with the respective city council's approved tax rate. The education tax rate and city-building fund levy make up the city's agreed tax rate, which can be found here.
Two central parts make up property tax, a municipal tax that depends on the municipality of the property and an education tax that is the same throughout the province where you reside. Some cities require more property tax to allow more services to function, like more extensive public transit options or housing projects in a town. The downside is that if the property tax is high, few people can afford to live there or want to live there instead of areas with lower property taxes. However, Toronto has the lowest property taxes of a municipality with a population of over 10,000 people with a final tax rate totaling 0.599704%.
To put this into perspective, a first-time homeowner in Windsor, Ontario, would pay roughly $9,000 each year in property taxes, while a first-time homeowner in Toronto would only pay $3,000. This means many people are still interested in buying homes in Toronto because they can potentially save thousands of dollars every year on low taxes.
The property tax in Toronto is so low because high-value homes combined with a large population make it easier to keep the tax rate low. The city of Toronto is basically collecting more money from a large number of people in more expensive houses. This is excellent news for people who can afford to buy a home in Toronto, but this is not the case for most Canadians. The sheer cost of most Toronto houses keeps upper-middle through lower-class Canadians from taking advantage of these tax savings.
Individuals also might pay separate taxes on different kinds of living. For example, a homeowner buying a condo pays less property tax but more maintenance fees than someone living in a detached house. Various places of residency can also ensure property tax fees that range as well. New homebuyers who need to pay property tax will be charged a setup fee for their account that totals around $60.
It's not just individuals who pay fees, either. If a business or corporation buys a property and pays taxes, their fees depend on what kind of business or services they provide. Therefore, limitations on annual property tax increase for specific companies and multi-residential properties. Companies are also given different property taxes and have recently had tax capping added to their yearly adjustments. Businesses have also been given a tax rate reduction due to COVID-19 restrictions, totaling a reduction that is 2.5 times more than residential tax rates.
What's the Overall State?
The overall state for Toronto property tax is good news for businesses trying to cut costs in the wake of COVID, but not so great for new homeowners trying to break into the market. With government reductions and capping implemented for businesses and commercial buildings, struggling smaller companies can take advantage of Toronto's low property tax benefits. However, more prominent corporations that have not struggled as much in Toronto still benefit from these and may use their savings to buy up more small businesses so there is less competition within the city.
For Toronto's first-time homebuyers, the picture is a little bleaker. With housing options low and unaffordable, new homebuyers struggle to get into the market to receive low property tax benefits. Many Canadians struggle to understand the fees and differences within the Toronto real estate market. Luckily, all Canadians have access to the city of Toronto's property tax calculator, which helps break down how your home is affected by property taxes.
There are also many vital resources online like Properly, whose blog offers tips and tricks for first-time homebuyers to receive the best deals and offers. Properly also has a deep understanding of the Toronto housing market and Toronto property tax to help new homebuyers find what they are looking for.
It is not all doom and gloom for Toronto's housing market. More and more resources like Properly help Canadian homeowners deal with the trials and tribulations of buying property in Toronto. As long as the people looking to buy housing in Toronto are aware of all their resources, new homeowners can break into the market and not pay too much to do it.
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