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Property Tax -Basics to know

Property tax is one of the many types of tax that many people must pay. This is a tax you pay for owning real property such as a house or land. In Ontario Canada, this tax is a large source of revenue for municipalities.

How is property tax calculated?

In Ontario, property tax is based on the assessed value of a property. The Municipal Property Assessment Corporation(MPAC) is the entity that is responsible for assessing all properties in the Province. The assessed property values are sent to municipalities annually. Municipalities set the tax rates for the different classes of properties. In general, tax bills are calculated by multiplying the tax rates by the assessed values. Many municipalities issue two tax bills each calendar year, each bill covering six months of the year.

The revenue collected from property tax is used by municipalities to provide various services. Budgets are transparent and explain how the money that is collected is used. If you would like to learn more about how the money is spent, many municipalities send this  information to residents and also publish it online.

What happens if you don’t pay the property Tax?

If you don’t pay your property tax, the interest/penalties accumulates very quickly due to the rate that is charged. The interest rates can exceed some commercial lending rates. You might even find it cheaper to borrow at a lower interest rate to pay your tax arrears. Unfortunately tax and interest are hardly forgiven. Some municipalities have programs that provide tax relief to property owners, but most tax breaks don’t add up to much and are geared towards senior citizens or special circumstances such as extreme illness.

If you do not pay your tax, there is legislation that allows municipalities to recover unpaid taxes by selling your property. This process is slow and you will receive several notices prior to the sale. If you ignore all these notices, your home will be sold to pay the tax arrears and it does not have to be sold at market price. During this process, mortgagees can also move in to pay off the outstanding taxes to protect their interest and can turn around and sell your home by foreclosure.

What you can do to avoid losing your home? 

  • Respond to any notices that you receive in a timely manner.
  • Ask for options that are available to help you pay the outstanding taxes.
  • Review your finances, explain your financial difficulties and set up a payment arrangement.
  • If you have many questions that can’t be resolved by phone or mail, arrange a face to face meeting with a tax official.
  • If your financial circumstances improve, consider paying taxes before other bills.

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