When buying a home, affordability and mortgage costs are typically top of mind. However, there’s one significant carrying cost that’s often overlooked, especially for buyers striving to break into highly coveted neighbourhoods – the amount of property tax you’ll need to pay each year.
Related Read: The Highest and Lowest Property Tax Rates in Ontario (2019)
What is Property Tax?
In Ontario, where the levy accounts for $19 billion in revenue, property taxes are comprised of three parts:
- The overall assessed value of your home, as determined by the Municipal Property Assessment Corporation (MPAC). This takes into account recent comparable home prices in your neighbourhood, as well as your home’s specific features. For example, whether a home has received renovation updates, has a pool or basement, or a larger lot size, will all be factored into its assessed value.
- The Education Tax Rate, implemented by the province of Ontario, the proceeds of which are used to fund regional schools.
- The Residential Tax Rate, which is determined annually by a municipality’s city council, based on how much funding must be raised to meet their budget requirements.
Because property taxes increase in tandem with a property’s value, that can lead to tax shock for homeowners in neighbourhoods where home prices are rapidly appreciating.
Related Read: How Land Transfer Tax Impacts Affordability Across Canada
Property Taxes Vary Based on Your City
As well, the amount of tax paid can vary widely based on municipality, as some cities tax at a higher rate based on population, infrastructure needs, and political motivation. Because property taxes support all manner of municipal services, such as emergency and police services, parks and recreation, social programs, and transportation, the rate charged depends heavily on what council needs to spend that year.
In areas that are considered rural and outside the jurisdiction of a city, town, or village, homeowners pay the Provincial Land Tax in lieu of the municipal residential tax, the rate of which is set by the Province of Ontario.
GTA Cities with the Most Property Tax
Because property tax rates differ from region to region, some homeowners will pay significantly more each year than in neighbouring cities. For example, residents dwelling within the City of Toronto, where council opts to keep the rate at or below inflation, actually pay at the lowest tax rate in the province at 0.63 per cent.
Those in the MLS district of Toronto East, based on an average home price of $771,830, pay $4,905 each year, while Toronto West residents can expect to pay $5,019 based on an average home price of $789,739. Homeowners in Toronto Central, which has the highest average home price of $966,088, would pay $6,140 per year in property tax.
In contrast, that’s several thousands of dollars less than in the highest-taxed municipality of Orangeville which, despite having a comparably low average home price of $560,735, would pay a whopping $7,906 in property tax based on a rate of 1.4%.
To find out how property taxes differ, Zoocasa calculated the average amount of tax paid, based on the municipal tax rate and average home price, in each region of the GTA. Check out the infographic below to see how property taxes vary across the region.