What is a Property Assessment?
As an Ontario homeowner, you might have been delighted with the soaring property values that have characterized the last few years. Unfortunately, profit has its price: property taxes, which are based on the value of your property, have been re-assessed for the 2017-2020 property tax years. Are you prepared?
Here’s what it all means, and what to expect from the taxman.
Property Assessment in Ontario
In Ontario, property assessments are carried out by the Municipal Property Assessment Corporation, or MPAC, an independent, not-for-profit corporation that operates throughout all of Ontario’s municipalities.
MPAC’s role is to accurately assess and classify all of Ontario’s 5 million-plus properties at regular intervals, or when changes occur on a property, such as new construction. Property values are generated using a mass appraisal technique that relies on computer modeling.
MPAC doesn’t make up its own rules; it operates according to regulations put in place by the Government of Ontario.
When assessing properties, MPAC should act in compliance with the Assessment Act, the official name for Ontario’s property assessment legislation. Then the individual municipalities set property tax rates based on their own revenue requirements, and collect property taxes to pay for city services like police and firefighters; education tax rates set by the Ontario Government’s Minister of Finance to fund education, form the second part of a homeowner’s total property tax bill.
What Your Property Tax Assessment Notice Means
All residential, commercial, industrial, etc.. property owners in Toronto will have already received a 2016 Property Assessment Notice, which states the current value of your property (according to MPAC’s assessors) as of January 1, 2016. If you own commercial or industrial property you may have just received your assessment notice. Your tax assessment notice is not a bill, it’s just an updated assessment of what MPAC believes your property could have reasonably sold for on January 1st, 2016. It will however be used to calculate your tax bill.
How Does MPAC Assess Properties?
So how exactly does MPAC determine your property’s value?
MPAC uses one of the three property valuation approaches, the same ones that real estate agents learn at OREA College: the Direct Sales Comparison Approach, whereby your home is compared with others that share similar characteristics and locations; the Income Approach, in which an assessment is based on the property’s ability to generate revenue; or the Cost Approach, in which the property is evaluated by how much it would cost to construct another just like it. Which approach is used all depends on what your property is currently being used for and how many comparable properties are being bought and sold on the market, and at what price. The assessment notice itself provides information on the value MPAC has given to your home, commercial, industrial property etc.. which will be used to calculate your annual property taxes.
A number of years ago, the municipalities changed the look of the property tax assessment notice to simplify it. Yet you still might question what exactly you are looking at. Call or email us to book a time that we can discuss how we may reduce your tax liability.
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