There are plenty of bills that come with owning a home, and property taxes are one of them. Yet you may have noticed that your property taxes tend to change every year, which is often because of the regular property tax assessment that your local government conducts. But what is a property tax assessment? And how exactly does it affect your property tax bills? Here’s what you need to know.
Key Points
- Your property taxes are based on your home’s assessed value and your municipality’s property tax rate.
- Your home’s assessed value is determined by several factors, including its size, location, age, construction type, and use.
- Your property tax bill can increase or decrease in any given year if the assessed value of your home and tax rate change.
What Is A Property Tax Assessment?
Local governments use the revenue generated from property taxes to cover the cost of various public services they provide such as policing, road maintenance, street lighting, public schools, and so forth.
A property tax assessment is a way for governments to value real estate for taxation. Any changes made to a property during a tax year, such as major renovations or a change in ownership, are factored into property tax calculations.
How Are Property Taxes Calculated?
As mentioned, the property taxes you’re charged are based on your home’s current market value and your municipal tax rate. Generally speaking, property taxes are calculated by multiplying the tax base by the tax rate.
- Tax Base — The tax base is the total dollar value of your home to which the property tax rate is applied.
- Tax Rate — In Canada, every municipality determines their own tax rate, which usually ranges between 0.5% to 2%.
How Are Property Values Calculated?
There are three main methods used by appraisers to determine the value of a property:
Cost Method
The cost method is based on the substitution principle. This estimates the value of a home based on how much it would cost to construct a replica of the subject property.
With this method, the property’s value is equal to the total cost to build the property plus the cost of the land, minus depreciation. According to this property assessment method, no buyer would pay more for a home than the cost to build the same property.
Comparison Method
This method of appraisal involves comparing a subject property to other similar properties sold over the recent past and located in the same neighbourhood. The more recent the sale and the closer to the subject property, the more accurate the assessment.
Real estate agents tend to use the comparison method when determining how much a property could sell for. Listing agents will use this approach to establish an appropriate listing price, while buyer agents use this method to come up with a fair offer price.
Income Method
Investors tend to use the income method to determine the value of an income-generating property. In other words, it gives investors an accurate idea of how much a property is worth based on how much net income they can earn from it.
More specifically, the income method of appraisal divides the net operating income (NOI) of the rent collected by the capitalization rate, or ‘cap rate’. This rate estimates the potential return on a real estate investment.
Who Assesses The Property Value?
Every city across Canada has its own independent assessment office that determines how much a home is currently worth. This value is then used to determine how much homeowners must pay in property taxes based on the current tax rate. Here’s who exactly assesses the property value where you live:
Atlantic Provinces
| New Brunswick | In New Brunswick, the Property Assessment Service evaluates and assesses all properties each year. If you’d like to know your property assessment value, you can check using an online tool called Property Assessment Online (PAOL). |
| Prince Edward Island | In PEI, the Taxation and Property Records Division of the Department of Finance, Energy and Municipal Affairs is responsible for assessing the value of properties. Value is assessed based on the Real Property Assessment Act. |
| Newfoundland and Labrador | Every year, the Municipal Assessment Agency assesses properties in Newfoundland and Labrador. The assessments are performed following the Assessment Act, 2006. The City of St. John’s is in charge of its own assessment service. |
| Nova Scotia | The Property Valuation Services Corporation (PVSC) is responsible for all property assessments in Nova Scotia. They are an independent non-profit organization that delivers property assessment notices to homeowners every January. Every December, they provide an assessment roll to all municipalities in Nova Scotia, which is used by the government to set property tax rates. |
Western Canada
| British Columbia | BC Assessment provides independent value assessments on properties within jurisdictions across the province for purposes of taxation. Property assessment information is released by BC Assessment once a year. |
| Alberta | Each municipality in Alberta has its own assessment office that determines the value of properties within their respective jurisdictions. The Assessment and Property Tax Policy Unit oversees the property assessment and tax policy system in the province. |
| Saskatchewan | Saskatchewan Assessment Management Agency is in charge of providing the province’s property assessment tool. SAMA works independently of the Saskatchewan government. |
| Manitoba | In Manitoba, Assessment Services is in charge of the assessment of property in the province, except for the City of Winnipeg. Winnipeg is responsible for its own property assessment services. |
Central Canada
| Ontario | In Ontario, properties are assessed by the Municipal Property Assessment Corporation (MPAC). Assessments are currently determined by the value of properties as of January 1, 2016, which is the latest legislated valuation date. If certain changes occur on a property during a tax year, MPAC will send out an updated assessment notice. |
| Quebec | In the province of Quebec, properties are assessed every three years by the Municipalité Régionale de Comté (MRC). Each MRC assesses properties within its jurisdiction and sends out assessment rolls independently. |
What If You Don’t Agree With The Property Tax Assessment?
If you believe that you’re being charged higher property taxes unfairly, you have the right to challenge it. Each municipality has designated review boards that can hear reviews and appeals. You may consider this approach if you feel that your property’s assessed value does not accurately reflect the current market value.
For instance, if your home is located in Ontario, you can submit a Request for Reconsideration (RfR) with MPAC. Keep in mind that there are deadlines for such requests. In Ontario, for instance, the deadline for the 2024 property tax year was April 2, 2024.
If you disagree with MPAC’s response after submitting your RfR, you can appeal this decision with the Assessment Review Board (ARB).
Where Are The Highest And Lowest Property Tax Rates In Canada?
Property tax rates vary greatly across Canada. Interestingly, the cities with the highest tax rates aren’t necessarily the ones with the more expensive housing prices.
According to recent data as of 2023, the following top 5 cities in Canada have the highest property tax rates and the lowest tax rates
| Highest Property Tax Rates | Lowest Property Tax Rates |
| Winnipeg, MB: 2.6439% | Vancouver, BC: 0.27807% |
| Sault Ste. Marie, ON: 1.720655% | Abbotsford, BC: 0.37806% |
| Charlottetown, PEI: 1.67% | Kelowna, BC: 0.39979% |
| Saint John, NB: 1.62% | Victoria, BC: 0.43621% |
| Regina, SK: 1.556501% | Montreal, QC: 0.5305% |
What If You Can’t Afford Your Property Taxes?
Depending on where you live and the value of your home, you may find yourself paying sky-high property taxes, and this tax bill typically increases every year. So, what happens if you can’t afford to cover your property tax bill? Here are a few solutions.
Seek Government Assistance
If you’re a senior and don’t think you can pay your property tax bill, look into property tax deferrals. Some provinces offer programs to help seniors pay their property taxes. For example, British Columbia, Ontario, Manitoba, and New Brunswick all have programs to help seniors defer their property taxes.
Apply For A Personal Loan
If you can’t come up with the full property tax amount by the due date, consider taking out a personal loan. You can use the funds from the loan to pay your property tax bill on time to avoid becoming delinquent. Then, you’ll be left with much smaller payments that you can spread out over time to repay your personal loan.
Check your credit score before applying for a personal loan, which you can do for free using Loans Canada’s CompareHub.
Property Tax Assessment Vs. Appraisal
Are property tax assessments and appraisals the same? After all, they both involve determining the value of a home. So, what’s different between them?
Both terms have similarities, but they should not be used interchangeably as there are distinctions between them:
- Appraisals. An appraisal is used to determine the actual value of a home in light of a purchase or sale transaction, or for financing associated with the property, such as a Home Equity Line of Credit (HELOC).
- Assessments. On the other hand, an assessment measures property value to determine how the property is taxed by the government.
Essentially, appraisals and property tax assessments are both used to determine property value, but for two very different purposes.
Property Tax Assessment Vs. Market Value
The assessed value and market value of a home differ in a few ways.
- Assessed value. The assessed value of a property is determined by the local tax assessment office in a jurisdiction. It is used by governments to calculate property taxes. Further, a property’s assessed value directly affects the property taxes the homeowner must pay.
- Market value. Conversely, the market value of a home is determined by buyers and sellers in a live real estate transaction. In addition, the market value only affects the price that a home sells for under current market conditions.
Final Thoughts On Property Tax Assessment
Property tax is an important cost associated with homeownership. Municipalities across Canada charge homeowners property taxes based on property tax assessments. It’s important to make sure you pay these bills on time when they’re due. If you need extra time to come up with money to pay your property tax bill, you can try using a personal loan.
