Property Value and Property Taxes
Your property value and the property taxes you pay are not the same thing. On this page, you can learn how they are related.
- How your property tax is calculated
- How values and tax rates change over time
- How value increases are phased in and decreases are applied immediately
- Different levels of government with different responsibilities
How your property tax is calculated
Property taxes are calculated using the assessed value of your property and multiplying it by the combined municipal and education tax rates for your class of property.
Your municipality or local taxing authority will use these taxes to help pay for the services they are responsible for such as:
- road maintenance
- waste disposal
- parks and leisure facilities
Education tax rates, set by the Ontario Government, may also be applied using these assessed values.
To learn more about how taxes are calculated, watch the video below.
Your property tax is proportional to the value of your property
In this example, a small municipality with three properties worth $125,000, $175,000 and $200,000 has services costs of $2,000 that are paid by property owners through property taxes.
Each property owner in the municipality pays a proportion of that $2,000 based on their property's assessed value. This is calculated by first adding up the value of all three properties, for a total of $500,000. Since the cost of services is $2,000, the tax rate is 2,000/500,000 = 0.004, or 0.4%. Therefore:
- The owner of the $125,000 property pays $500.
- The owner of the $175,000 property pays $700.
- The owner of the $200,000 property pays $800.
- The total of the property tax paid by the three property owners is $2,000.
Changes in value over time
Below you'll find some examples to illustrate how property values and property tax rates change over time.
Example 1: Equal percentage value change
Every four years the properties are reassessed. If they all go up equally in value—for example, by 5%—their proportions stay the same.
- The $125,000 property is now valued at $131,250.
- The $175,000 property is now valued at $183,750.
- The $200,000 property is now valued at $210,000.
The total value of the three properties is now $525,000. If the total cost of services hasn't changed—it's still $2,000—the tax rate is now 2,000/525,000 = 0.00381, or 0.381%, which is a decrease in the tax rate. But when you apply that rate to each of the properties, everyone still pays the same amount as they did before.
- $131,250 x 0.381% = $500
- $183,750 x 0.381% = $700
- $210,000 x 0.381% = $800
- The total of the property tax paid by the three property owners remains $2,000.
Example 2: Different percentage value change
If the properties increased by different amounts, the property tax proportions would change.
- If the first two properties increased from their original amounts by 5%, they are now valued at $131,250 and $183,750.
- If the $200,000 property goes up by 10%, it is now valued at $220,000.
The total value of the properties is now $535,000. If the total cost of services hasn't changed—it's still $2,000—the tax rate is now 2,000/535,000 = 0.00374, or 0.374%. The proportion that each property pays is now different, and the properties whose values went up less now pay less, while the property whose value went up more now pays proportionately more.
- $131,250 x 0.374% = $491
- $183,750 x 0.374% = $687
- $210,000 x 0.374% = $822
- The total of the tax paid by the three property owners remains $2,000.
Example 3: Increase in municipal costs
If your municipality needs more money, your property taxes may increase.
Using the original property values of $125,000, $175,000 and $200,000, an increase in municipal costs to $2,500 increases the overall tax rate to 0.5%.
The total value of the three properties is $500,000 and the cost of services is now $2,500, so the tax rate is 2,500/500,000 = 0.005, or 0.5%. Therefore:
- The owner of the $125,000 property pays 0.5%, or $625.
- The owner of the $175,000 property pays 0.5%, or $875.
- The owner of the $200,000 property pays 0.5%, or $1,000.
- The total of the tax paid by the three property owners is $2,500.
Phase-in: how value increases and decreases are applied
When we determine that your property value is higher than the previous valuation, we phase that new value in over four years. If we determine that your property value is lower than the previous valuation, we apply that lower valuation immediately.
Different levels of government with different responsibilities
The Provincial Government, MPAC and municipalities all have different areas of responsibility in Ontario's property assessment and taxation system. Each plays an important role.
Ontario Provincial Government
- passes legislation
- sets assessment policies
- determines education tax rates
- Determines current value assessments and classifications for all properties in Ontario.
Municipality/local taxing authority
- Determines their revenue requirements.
- Sets municipal tax rates and policies.
- Collects property taxes to pay for your municipal services.