How to Calculate Property Tax in Canada (2024)
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Did you know that every city in Canada has a different property tax rate? It can feel confusing, especially if you are just learning the basics for purchasing your first home.
With our Property Tax Calculator, you can predict how much tax you're likely to pay, depending on its location. This can be essential in budgeting, ensuring you aren't left with an unexpectedly large bill after purchasing your new dream house.
In this guide, you will learn the basics of Canadian property taxes and have the answers to confidently navigate them for your next home purchase.
How do you calculate property tax in Canada?
Each municipality across the country sets its tax rate annually. Depending on where you live, this is typically between 0.5 to 2.5%.
Many people believe your property tax is based on the purchase price of your home, but that isn't true. To more accurately indicate your property tax, you will need to know the assessment value for the province you're purchasing in instead.
Once you know the home's assessed value, you can multiply it by the tax percentage for the location.
Example:
For example
You're looking to purchase a home in Canmore, Alberta, which was assessed at $400,000. The property tax percentage for that area is 0.5% giving you a total amount of tax due of $2,000 (Value of your home x Property Tax percentage for the area = tax total)
Following the initial acquisition of your property, you will have to pay property taxes annually, but the frequency that your home's value is assessed will vary depending on where you live in the country.
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How does property tax work?
Do you enjoy the convenience of having garbage and recycling picked up on your street each Monday? What about that beautiful new park that they just added to your neighbourhood? These services are funded through your municipal government, which uses your property taxes to take care of your area.
In fact, there are many areas that your tax dollars go, such as:
- Emergency services
- Road maintenance
- Waste and water services
- Salting, gravelling & snow removal
- Libraries & schools
- Pools, parks and other public recreation sites
We have focused on residential property in our guide, but property taxes are applicable to all types of property. Non-residential property may be taxed at different rates.
Your local government will dictate where and how much of the collected funds will be spent, but quite often, big decisions are discussed and voted on during your local elections.
The province you live in will indicate how often your property will be assessed and multiply the value of your property against the annual tax rate for your area. This does mean that if you or your neighbourhood see significant improvements since your last assessment, your property taxes are likely to increase.
It is good to be aware that there are multiple fees factored into the property tax amount as well, and they vary where you live. Most commonly, you will experience municipal tax and education (also known as 'school') tax.
What is municipal tax?
Your community will have specific needs and preferences that will require funding in order to maintain or grow, such as public spaces or services. The federal government supports these local initiatives, but the primary funding comes from property taxes in your municipality, also referred to as a municipal tax.
Each year your local government will review and budget for what is needed in your area and release the annual property tax percentage.
What is education tax?
Education or school tax is a provincial-based property tax to ensure all students receive a fair and quality education, funding teaching resources, public school salaries, textbooks, libraries, etc.
The education tax is paid by anyone who is a property owner, regardless if they have children in school or not.
What other taxes may be included in my property tax?
Depending on the city you live in, you may see a breakdown of tax types on your property tax bill. These are specific to your location and generally only seen in major cities, such as the Building Levy under property taxes in Toronto.
Your local government may also show additional taxations for unpaid charges such as utilities or fees for littering or not taking care of your yard.
In most cases, however, you will be likely to only see breakdowns for municipal & education taxes on your property tax bill.
What is property assessed value?
The assessed value of your home can differ from the market value. This can be confusing at times, but to make things simple, the tax authorities for your local area will send a notification to advise that a tax assessor will be reviewing your property. Depending on where you live, this can be done either annually or up to every 4 years.
The assessor will be looking at not only your home but your neighbourhood and the factors below in their evaluation.
- Size of your home
- Renovations and improvements
- Comparable properties in your neighbourhood & the direct neighbouring houses
- How old your home is
- Fencing, garages, decks or similar features
Good to know
The property assessment amount is private to the homeowner, which can add challenges to budgeting when you're buying a new home. Thus, it is wise to plan for some slight discrepancies throughout the process.
How do you pay property taxes?
Your property taxes will be paid to your local government through varying methods, but the most common methods are:
- Direct: You will receive a bill (the frequency varies depending on your location) that can be paid in person at your local city hall, through your online or by phone.
- Mortgage: Your lender can add and evenly distribute your annual property taxes into your mortgage payments. This is a common option for first-time homebuyers or those with less home equity.
If you are feeling stuck and need support to pay your property taxes, the CRA (Canada Revenue Agency) may be able to help.
Expert advice
When figuring out how much you can spend on a home consider costs beyond just the mortgage payments. Property taxes, home insurance and utilities can vary widely from one area to another.
How is property transfer tax calculated?
Property Transfer Tax is charged when you purchase a new property and is included in your closing costs. The amount you will need to pay depends on the property value and the provincial regulations.
Unlike the other property taxes, the property transfer tax is calculated based on your home's purchase price and not the assessed value.
For most provinces, there is a bandwidth and marginalized approach to the percentage that is charged, ranging from 1-3%. Using a property transfer tax calculator can help your financial planning for your specific circumstances.
Let's look at an example.
For example
Under BC property tax regulations, the following transfer taxes are applied per bandwidth on the purchase price of your property:
- Up to $200,000 = 1%
- $200,001 to $2,000,000 = 2%
- $2,000,000 - $3,000,000 = 3%
- $3,000,000 or more = 5%
Using the details above, and assuming you are purchasing a home for $300,000, you start your calculation by figuring out how much you owe per tax bandwidth and adding them together to find your total.
First Bandwidth (Up to $200,000 = 1%): You calculate this by multiplying your property value ($300,000) and the 1% taxes due for this amount to give you a subtotal of $2,000 in transfer tax for the first bandwidth.
Second Bandwidth ($200,001 to $2,000,000 = 2%): Subtract your property value ($300,000) from the lower tax bracket ($200,000) and multiply it by 2% (the corresponding amount above), giving you another $2,000 in transfer tax.
For example
First Bandwidth ($2,000) + Second Bandwidth ($2,000) = Total Property Transfer Tax ($4,000)
How are capital gains tax on the sale of property calculated?
When you sell a property in Canada, 50% of the capital gains (profits) are taxed as part of your annual income.
You will first need to know the Adjusted Cost Base (cost of the property and all of the fees), your Proceeds of Disposition (the money you received) and the tax Marginal Income Tax Rate for your area.
For example
Step-by-Step Calculation:
- Proceeds of Disposition - Adjusted Cost Base = Capital Gain
- Capital Gain X 50% = Taxable Capital Gain
- Taxable Capital Gain X Marginal Income Tax Rate = Total Capital Gain Tax Owed
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What cities have the highest property taxes in Canada?
The cities with the top 3 highest property taxes in Canada are currently Saint John (NB), Fredericton (NB) and London (ON).
In contrast, the Canadian cities with the lowest property taxes are Vancouver (BC), Abbotsford (BC) and Victoria (BC.)
In the chart below, you can see the Property Tax Rate as of January 2023 for the major Canadian municipalities, sorted from highest to lowest.
| Location | Property Tax Rate |
|---|---|
| Saint John, New Brunswick | 1.62% |
| Fredericton, New Brunswick | 1.42% |
| London, Ontario | 1.35% |
| Hamilton, Ontario | 1.26% |
| Winnipeg, Manitoba | 1.25% |
| Guelph, Ontario | 1.17% |
| Kitchener, Ontario | 1.13% |
| Lethbridge, Alberta | 1.11% |
| Halifax, Ontario | 1.11% |
| Waterloo, Ontario | 1.11% |
| Regina, Saskatchewan | 1.07% |
| Ottawa, Ontario | 1.07% |
| Quebec City, Quebec | 0.88% |
| Edmonton, Alberta | 0.87% |
| Saskatoon, Saskatchewan | 0.87% |
| Mississauga, Ontario | 0.82% |
| Burlington, Ontario | 0.82% |
| Montreal, Quebec | 0.77% |
| St. John’s, Newfoundland and Labrador | 0.73% |
| Calgary, Alberta | 0.64% |
| Toronto, Ontario | 0.60% |
| Kelowna, British Columbia | 0.53% |
| Victoria, British Columbia | 0.52% |
| Abbotsford, British Columbia | 0.51% |
| Vancouver, British Columbia | 0.25% |
Who is exempt from property taxes in Canada?
With the regulations on property taxes being unique to your specific location, each province will have its own rules based on any exceptions. In the majority of cases, anyone owning (any type) of the property will have to pay their property taxes.
If your property houses multiple seniors (65+) or those with a disability, there is a likelihood that your municipality has grants available.
Certain provinces will also consider new accessibility-based renovations during the home's tax assessment, which, in some cases, can be grounds for partial exceptions.
Speaking with your representative at city hall can help you pinpoint what may apply to you in your area.
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