Property Assessment in Ontario
The Government of Ontario has made a number of changes to the property assessment system that went into effect in the 2009 property tax year. These changes include the introduction of a four-year assessment update cycle and a phase-in of assessment increases.
Currently, the assessed value of properties in Ontario is based on a January 1, 2008 valuation date. MPAC’s last province-wide assessment update took place in 2008 and was based on a January 1, 2008 valuation date.
To provide an additional level of property tax stability and predictability, the market increases in assessed value between 2005 and 2008 will be phased-in over four years. The phase-in program does not apply to decreases in assessed value. Any market decrease in the value of a property is applied immediately and reflected on your most recent Property Assessment Notice. The change in assessed values and the phased-in assessment values for the 2009 to 2012 property tax years are listed on the 2008 Notices. There is a difference between the 2008 Current Value Assessment (CVA) (the destination value) and the current year’s phase-in value. The current year (which can be 2009, 2010, 2011 or 2012 taxation year) phase-in value is the assessed amount that the municipalities or the local tax authorities use to calculate the annual property taxes. An example of this is as follows:
- Current year (2010) Phase-in CVA=$250,000
- Total Municipal Tax Rate= 1%
- Total Municipal Tax burden = $250,000 x 1%= $2,500.
The 2008 CVA is not used until 2012 since this is the destination value. The municipalities/local taxing authorities set property tax rates and the province sets the education tax rate. MPAC’s assessed values are used to determine these taxes.
How MPAC Assesses Properties
MPAC’s mandated role is to accurately value and classify all Ontario properties in compliance with the Assessment Act and related regulations. To establish a property’s assessed value, MPAC analyzes property sales in a community to determine the CVA. This method is used by most assessment jurisdictions in Canada and throughout the world. When assessing a residential property, we look at all of the key features that affect market value. Five major factors usually account for 85% of the value: location; lot dimensions; living area; age of the structure(s), adjusted for any major renovations or additions; and quality of construction. Examples of other features that may affect a property’s value include: number of bathrooms; fireplaces; finished basements; garages and pools. Site features can also increase or decrease the assessed value of your property such as traffic patterns; being situated on a corner lot; and proximity to a golf course, hydro corridor, railway or green space.
For more information, see the MPAC website »
Don't be surprised ...
Thinking of selling your home? -- well there's always next year.
But wait .. next year may be too late. The new 13% harmonized sales tax comes into effect in Ontario on July 1, 2010, and it will likely hit the whole housing market hard. If you haven't sold by July 1, you may well be out of luck. And if you haven't bought by then, well, maybe you'll want to change your mind. And the funny thing is, hardly anyone seems to realize it.
"There are going to be a lot of very surprised people on July 1," says Jim Flood, director of government relations for the Ontario Real Estate Association. "It's a massive tax increase."
So here's the bad news: Although resale houses will not be taxed, everything to do with the sale will be -- the house inspection, the agent's commission, the moving costs and legal fees.
There will even be tax on the home energy audit all sellers are now compelled to carry out thanks to the Green Energy Act the McGuinty government passed in May. And speaking of the home energy audit, why isn't anyone concerned about that?
Altogether, that means the extra tax on a resale house priced at $369,000 will come in at roughly $2,000 (largely the tax on the agent's commission) and double that and more on many ordinary houses in Toronto, before you even remember you have to pay Toronto's onerous land-transfer tax, too.
It's enough to make you wonder exactly why you're thinking of moving. Or to get you packing your bags and calling the mover today.
But it's worse news for new home buyers, although not as bad as it was originally expected to be. Under pressure from groups like the Ontario Home Builders Association, the province has decided not to levy the tax on the first $400,000 of any new home purchase. (GST has been payable for a number of years but builders tend to hide it in the house price.)
So on a $500,000 house, the extra HST hit will be $6,000 instead of $30,000 (builders get a 2% tax credit that lowers the overall tax hit from 8% to 6%). Without that change, the loss of a potential 21,200 jobs in the GTA alone looked probable. That's enough to scare off first-time home buyers and potentially many other people struggling to make ends meet.
Easy, according to the OREA's Flood: "There's a lot of ignorance. I don't think the average consumer is even aware of the tax." The HST will impact many things you haven't even thought of yet -- but the housing-related taxes are killers.
How new tax adds to cost of a sale:
- Realtor Commission $1,100- $1,700
- Mortgage insurance $470
- Legal costs $80 *
- Home Inspection $32
- Title Insurance $15
- Total $1,747 -$2,297
(Estimates based on house less than $400,000, from Ontario Real Estate Association)
TREB speaks out on Toronto budget
More than 80 people, including representatives from several special interest groups showed up at City Hall on Wednesday to give a five-minute deputation to the budget committee, as consultations on Toronto's 2009 operation budget began.
The controversy over the proposed budget kicked off with the Toronto Real Estate Board asking councillors to take back the land transfer tax that was introduced in the last budget.
Toronto homeowners now have to pay a Toronto land transfer tax on top of the provincial land transfer tax.
When that is coupled with the proposed four per cent property tax increase, homeowners are paying a hefty price during a struggling economy, the TREB said.
"We warned City Hall that this is a bad tax, it's unfair and it will hurt the economy," said TREB lobyist Von Palmer.
Slump no reason for valuation appeals
'Just because everyone gets an assessment rise, doesn't mean taxes will increase,' Toronto's budget chief says.
The economic down-turn that is pummelling Toronto's real estate prices provides no grounds for home owners to appeal their latest valuations, the Municipal Property Assessment Corporation says. The good news, however, is that any discrepancy is unlikely to affect the bulk of property taxes in Toronto. The assessments are based on property values at January 1, 2008, long before the real estate market woes hit.
Premier Dalton McGuinty has called on municipal governments to "act reasonably and responsibly" and recognize that residents are receiving "perhaps ... an unrealistic assessment."
Toronto's land transfer tax falls short
Toronto's new land transfer tax isn't quite the solution to the city's budget crisis it was touted to be when Mayor David Miller finally pushed the controversial measure past city council last fall. The city had projected it would collect about $155 million in 2008, already considerably less than the $300 million per year mentioned in the original pitch. But the first five months of the tax actually brought in only $54.8 million.
Since then, the credit crunch, stock market gyrations, recession fears and possible budget deficits in the federal and provincial governments have taken a toll on consumer confidence – and on real estate values.
The official line is that the tax is still on-target for this year, avoiding a huge hole in the budget. But that would require collecting $100 million in just six months, which would seem impossible given the declining market and the fact the typical top sales months are already past.
And so far, no one at city hall is offering projections for next year.
Miller and allies got the transfer tax passed last year after an acrimonious, months-long debate on the grounds it would save taxpayers from a punishing tax hike. They succeeded only after a summer of budget-slashing, followed by compromise.
The tax was originally supposed to mirror the provincial land transfer tax, with rates that would generate $300 million annually. But to ensure council approval last October, the rates were lowered. For example, on a $400,000 home, the provincial tax is $4,475; the city tax only $3,725. Also, first-time buyers qualify for a rebate up to $3,725.
Councillors complain they've been kept in the dark about the tax revenue figures.
Councillor Michael Thompson has asked Miller in writing for details of contingency plans should the land transfer tax fall short, and whether service cuts may be needed to balance the 2009 operating budget. He hopes for an answer by next week's council meeting. "Specifically as it relates to the land transfer tax, I don't think we've been kept up to date on it," Thompson said.
The mayor expects to be able to balance the budget, including a 2 per cent to 4 per cent increase in the property tax to meet inflation, but without imposing big service cuts, said spokesperson Stuart Green.
"The mayor's plan all along is to introduce budgets that are balanced. We were able to do that last year and we should be able to do that this year," Green said.
But Von Palmer, spokesperson for the Toronto Real Estate Board, says the housing market "seems to be in a downward trend." "There's no doubt that the land transfer tax isn't helping," he said yesterday. "It's an upfront cost that people have to pay."
Councillor Paul Ainslie, a member of the budget committee, said officials referred to declining numbers when he recently asked about revenues from the new taxes."That's when they started saying ... it's nowhere near where it was expected to be," Ainslie said.
Other councillors on the budget committee, however, say concerns about a declining real estate market are overblown.
Councillor Adrian Heaps said developers have had no trouble selling out a new subdivision at Warden and St. Clair Aves. Even high-end homes are selling, he said.
Source: Paul Moloney reporting in the Toronto Star.
Toronto tax-payers live on easy street
Toronto homeowners just may be the most pampered, tax-sheltered, spoiled-rotten ratepayers in the GTA. The residential property tax hike to be approved at Toronto City Hall today or tomorrow is expected to be 3.75 per cent – among the GTA's lowest. Oshawa, in assessment-poor Durham Region, will hike taxes 4.61 per cent, and neighbouring Whitby, 5.67 per cent.
Little wonder residents outside the downtown core frequently write letters to the editor exasperated at Toronto's call for provincial funding of services. They look at a $380,000 house in Toronto and see a tax bill of $2,322, while a similarly priced home in Oshawa pays taxes of $5,745.
The owner of a $380,000 home in Pickering pays $4,270, while the Bramptonian pays $3,729 and residents of Markham, Mississauga or Vaughan pay more than $2,922. Toronto's neighbours wonder how Mayor David Miller can cry poor but refuse to tax Toronto homeowners at rates comparable to their municipal cousins.
Why is it that, hypothetically, a senior in Pickering can afford a 5 per cent tax hike, but Toronto politicians argue that a similar hike on a Toronto senior will push her out of her home?
Tax-Deductible Moving Expenses
Have you moved recently? Do you know that you can deduct certain moving expenses on your next tax return, including transportation, packing and storage costs. Many people do not realize these tax benefits because they don't know what can be deducted.
If you are preparing to move, it's best to be informed beforehand so you know which receipts to keep. You may also find it worthwhile to pay for various services that are tax-deductible rather than doing them yourself.
The typical move involves a number of costs including hiring a company to transport personal effects and furniture, hotel stays and meals (if the move involves driving a long distance to a new home), and service fees to disconnect and reconnect utilities. In addition, renters who leave on short notice may have to pay the cost of breaking a lease.
Homeowners will incur closing costs and commissions on the sale of their home as well as legal and other fees on the purchase of their new home. This article will enrich your information about some tax deductible moving expenses.
To be able to claim moving expenses on your taxes, your move has to meet the following conditions:
- You moved to your new home or new apartment to start a job or a business, or to attend full-time post-secondary courses at a university, college or other educational institution.
- Your new place of residence is at least 40 km closer to your workplace or school than your previous home.
- You moved from one place in Canada to another place in Canada.
Two groups are eligible to deduct a portion of their moving expenses: students moving away from home to attend school and people moving to a new area for a job or relocation by their employer. There has been a challenge to the rules regarding eligibility for the self-employed as you'll read later in this article.
Students must fulfill two main qualifications: the distance between your home and school must be at least 40km (by the shortest public route) and you must be a full-time student. A full-time student is defined as someone who regularly attends a college, university, or other educational institution in a program at a post-secondary school level (whether in Canada or not) and is taking at least 60% of the usual course load during each semester.
As a student, you can only deduct eligible moving expenses from award income (scholarships, fellowships, bursaries, prizes, and research grants) that you report on your return. Your moving expenses must be greater than your award in order to deduct any moving expenses. As Revenue Canada's website reads, "If your moving expenses are more than the award income you report for the year, you can deduct the unused portion of those expenses from the award."
Although many students will not earn award income and will therefore not be able to deduct moving expenses, tuition fees themselves are a tax deduction. If a student has a part-time job, tuition can reduce taxes paid on those earnings. Students who meet the qualifications and have received award income can deduct the costs of travel, shipping and transportation of belongings, as well as items listed below under 'Expenses you can deduct'.
If you are moving for work (e.g. a company relocation or new job), are employed and establish a home at least 40 km closer to a new job than your old home, then you qualify to deduct moving expenses. Similarly, if you are self-employed, and you establish a home at least 40km closer to your new operational business than your old home, you also qualify to deduct moving expenses.
According to Revenue Canada, you must establish your new home as the place where you and members of your household ordinarily reside. For example, you have established a new home if you have sold or rented (or advertised for sale or rent) your old home.
Employed and Working from Home: an Exception to the Rule Until recently, employees who work from home and move have faced some restrictions regarding moving expenses. In the court decision Gary Adamson v. the Queen, Mr. Adamson had incurred moving expenses as an employee who was required to provide his own office in his home.
Expenses you can Deduct:
- transportation and storage costs (such as packing, hauling, in-transit storage, and insurance) for household effects, including items such as boats and trailers;
- traveling expenses, including vehicle expenses, meals, and accommodation, to move you and members of your household to your new residence (you can choose to claim vehicle and meal expenses using the simplified method);
- costs for up to 15 days for meals and temporary accommodation near either residence for you and the members of your household (you can choose to claim meal expenses using the simplified method; and
- the cost of cancelling a lease for your old residence, except any rental payment for the period during which you occupied the residence.
When your old residence is sold as a result of your move, eligible moving expenses also include:
- legal or notaries fees for the purchase of the new residence, as well as any taxes paid (other than GST/HST or property taxes) for the transfer or registration of title to the new residence, if you or your spouse or common-law partner sold the old residence, and
- the cost of selling your old residence, including advertising, notarial or legal fees, real estate commission, and mortgage penalty when the mortgage is paid off before maturity.
Expenses that are not Deductible:
- expenses for work done to make your home more saleable;
- any loss from the sale of your home;
- expenses for house-hunting trips before you move;
- the value of items movers refused to take, such as plants, frozen food, ammunition, paint, and cleaning products;
- expenses for job hunting in another city (such as traveling expenses);
- expenses to clean or repair a rented residence to meet the landlord's standards;
- expenses to replace personal-use items such as tool sheds, firewood, drapes, and carpets;
- mail-forwarding costs (such as with Canada Post);
- costs of transformers or adaptors for household appliances; and
- costs incurred in the sale of your old home if you delayed selling for investment purposes or until the real estate market improved.
Remember to keep recipient and documents supporting your claims, you do not have to include those document in you tax claim but Canada Revenue Agency may want to see them at a later date.
Keep in mind that this article is for information only. The tax laws are frequently modified, we recommend that you visit the Canada Revenue Agency's website for specific details about which moving expenses you can claim or consult a professional accountant to maximize your tax return.
Property assessment freeze lifted
Are big tax increases coming for Toronto homeowners?
The end of a three-year assessment freeze could mean homeowners in some parts of the province may face double-digit hikes in property taxes. The provincial assessment freeze ended on January 1st. However, the Ontario government says it plans to spread out any assessment increases over the next four years.
The freeze was initiated following several complaints from property owners to the Ontario Ombudsman’s Office that the Municipal Property Assessment Corporation (MPAC) was conducting inaccurate and unfair assessments. Following an investigation, the Ombudsman’s Office made 20 recommendations for improvements to MPAC’s assessment system including changes to the way the Crown Corporation communicated with property owners.
As of the last report, the Ombudsman stated that MPAC had completed 10 of the 20 recommendations and was moving forward on the remainder. Among the completed recommendations is a revised brochure that is sent out with reassessment notices. This brochure now mentions how important it is that MPAC’s information be accurate and urges people to report any inaccuracies. It tells them clearly how they can review their assessment and look at up to 24 property comparable's, through a section of its Web site called “About My Property.” It also stresses: “If an error has been made, we will correct it. We are also happy to explain how we arrived at your assessed value and answer any questions.” Finally, it explains all the various ways you can complain about or challenge your assessment. In addition, the MPAC Web site now offers a lot more information about how properties are evaluated, and has posted many of its procedures online.
A new Property Taxpayer Web Portal is also being developed, through which owners will be able to access their Property Profile Report and comparables. The assessment notice form itself is also being redesigned for 2008. MPAC has done internal consultations, focus groups and property taxpayer customer interviews about this new form – but it is still reviewing it, because of the potential impact of the province’s new four-year reassessment schedule.
In the meantime, the revised assessment process is under way and property owners will be receiving their assessments in August and September. Current property taxes are based on market value assessments conducted by MPAC for January 1, 2005, and are determined by comparisons with the average city property value. If the estimated value of a property increases at a rate below the city average, the homeowner's property tax will decrease. If property value increases at a rate above the city average, the tax will increase. The reassessed values, with a valuation date of January 1, 2008, will apply to the tax years 2009 through 2012.
Toronto home buyer tax starts today
Buyers in Toronto's high-priced real estate market will be digging even deeper today as the city's newest tax goes into effect. "Obviously the day has come. It's still a back-breaking tax," said Von Palmer, spokesperson for the Toronto Real Estate Board, which led a bitter fight last year to block the municipal land transfer tax. "We hope it does not affect the market in a negative way."
Sales increased after the tax was approved last October, Palmer said. In the first two weeks of January, Toronto sales were up 21 per cent over the same period in 2007, while in the 905 area – where the tax does not exist – sales were up by only 5 per cent.
"We're not suggesting it's because of the land transfer tax. That would be speculation," he said. "However, human nature being the way it is, some are wondering how to avoid the land transfer tax."
The tax, on both residential and commercial properties, is in addition to the existing provincial tax.
Purchasers are exempt from the Toronto tax if they signed a deal to buy before December 31, even if the deal closes after today. Also, first-time home buyers receive a rebate on purchases up to $400,000.
Frequently asked questions
How will I pay the land transfer tax?
It will be paid as part of the up front closing costs along with the provincial land transfer tax.
What rebates are available?
Rebates will be given to purchasers who signed sales agreements before Dec. 31, 2007, or are first-time home buyers.
How does the rebate for first-time home buyers work?
If you are buying a residential property with up to two single-family residences, you are eligible for a rebate of up to $3,725. If your house price exceeds $400,000, you pay 2 per cent on the remaining portion.
How will I get the rebate?
If it's a full rebate, you will receive it when your lawyer registers your property transaction. You will not be required to pay the tax then. But if the price of your home exceeds $400,000, you are eligible for a rebate of only the tax paid on the first $400,000, and the full tax will be collected when your lawyer registers your property transaction. Once your lawyer submits your rebate application, a rebate cheque will be sent to you.
If I signed my deal to buy a house in January but it has not closed yet will I pay the new tax?
Yes, unless you are a first-time home buyer.
Toronto's "tremendous achievement"
Is this a strange characterization of higher taxes?
Toronto homeowners will face a 3.75 per cent property tax increase this year, as well as the city's new land transfer tax which comes into effect today. The Toronto land transfer tax, which comes into effect today, is expected to raise $175 million for city coffers. There will also be a non-residential property tax increase of 1.25 per cent.
According to the city, the property tax increase will result in an additional $80.70 in taxes on a residence worth $365,000, which is thought to be the average Toronto house price.
In a statement, Mayor Miller said, "This is a tremendous achievement for the city. Building a city that is livable and provides prosperity and opportunity for everyone is the most important role of local government. This budget allows us to start to make the kinds of investments Torontonians want and deserve. As a government, we have made difficult decisions over the past months and are now starting to turn the corner."
Miller's opponents on council are not impressed. They say the 2008 budget is just as unsustainable as the ones in previous years, the only difference being that the provincial bailout came early in the process instead of late.
Some councillors say the budget is a reflection of just how expensive it is becoming to live in Toronto with increased property taxes, land transfer fees, vehicle taxes and a new garbage fee.
The budget will go to a final vote at Toronto council at the end of March.