Owning a home is a major responsibility and often comes with questions about how taxes fit into the picture. One question many homeowners ask is whether real estate taxes and property taxes are the same. In Ontario, these terms can be confusing, and it helps to understand how each type of tax applies to homeowners. By learning the basics, you can stay informed, avoid surprises, and make better decisions for your property.
If you are ready to begin your home buying or selling journey, remember that having the right real estate partner on your side can make the process much smoother. The Johnson Team, known for their expertise in Toronto real estate, is here to guide you every step of the way. Kindly contact us to start working with an agent right away.
What Are Real Estate Taxes?
Real estate taxes, in broad terms, are levies on real property by a government. They often include the property tax you pay to your municipality, along with other possible taxes that apply when you buy or sell. The word “real” in “real estate” refers to the immovable nature of the property — land and buildings fall under real estate. In many provinces, including Ontario, you will encounter different taxes related to your property, such as:
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Municipal property taxes
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Land transfer tax
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Provincial or territorial taxes on real estate transactions
Some people use the terms “real estate taxes” and “property taxes” interchangeably. Others use “real estate taxes” to talk about any taxes tied to buying, selling, or owning real estate, while they use “property taxes” for the specific municipal taxes you pay each year. It is helpful to understand both phrases if you are buying or selling a home, or if you already own one in Ontario.
Property Taxes Explained
Property taxes in Ontario are the yearly taxes that municipalities charge homeowners. These taxes help fund local services, like schools, emergency services, parks, and road maintenance. Cities and towns decide how much money they need for these services and split the total cost among property owners based on the value of their homes.
How Property Taxes Are Calculated
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Assessing your property value
In Ontario, the Municipal Property Assessment Corporation (MPAC) is responsible for assessing your property’s value. This assessment is meant to reflect your home’s market value. The assessed value is then used to figure out how much tax you owe. -
Applying the tax rate
Once MPAC decides on a value for your home, your local government sets a tax rate. That rate is then multiplied by your home’s assessed value to get the total amount of property tax you owe each year. -
Factoring in education tax
A portion of your property tax goes to education funding. The provincial government sets the education tax rate, and this is also based on your property’s assessed value.
Where Your Property Tax Dollars Go
Many Ontarians wonder how their tax money is used. Your property taxes help pay for:
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Public education
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Local police and fire services
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Road maintenance
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Libraries
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Public transit
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Parks and recreational facilities
Paying property taxes is an important part of homeownership. It ensures you and your neighbours have access to essential services and infrastructure.
Real Estate Taxes: More Than Just Property Taxes
While property taxes are a part of real estate taxes, there are other taxes that sometimes fall into the same general category:
Land Transfer Tax
In Ontario, you pay a land transfer tax when you buy a property. This amount depends on the purchase price of your home. If you buy in the City of Toronto, you may also be subject to the Municipal Land Transfer Tax, which is in addition to the Ontario land transfer tax. These taxes do not apply to you once you officially own the property, but it is good to plan for them during the purchase process.
Capital Gains Tax
When you sell a property that is not your primary residence, any profit might be subject to capital gains tax. This does not affect most homeowners selling their principal residence, but if you own a second property, such as a cottage or a rental property, you may need to pay taxes on the profit from the sale. This is another cost that falls under the umbrella of real estate taxes, even though it may not apply to everyone.
HST/GST on New Builds
If you buy a newly built home or condo, you might see the Harmonized Sales Tax (HST) added to your purchase cost. For Ontario, this tax is currently 13%. Builders may include the HST in the home price, but it is always wise to confirm whether your purchase includes taxes or not. This type of tax is one more example of what people mean when they talk about “real estate taxes.”
Are Real Estate Taxes And Property Taxes The Same?
In everyday conversations, many people use “real estate taxes” and “property taxes” interchangeably, especially when referring to yearly municipal taxes on a home. The key thing to remember in Ontario is that property taxes refer to the annual fee you owe to your local government based on your home’s value. Meanwhile, real estate taxes can include a range of costs tied to a property’s life cycle, from buying and selling to ongoing ownership.
If you are ever unsure about what you owe, it is best to speak with a professional who can walk you through the details. This is part of why having a knowledgeable real estate team on your side is so valuable.
Key Takeaways
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Property taxes are the yearly fees your municipality charges for public services.
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Real estate taxes can be a broader term that includes property taxes, land transfer taxes, capital gains, or sales taxes like HST on new builds.
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In Ontario, the main property tax is decided by your municipality and is based on your home’s assessed value.
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Assessments in Ontario are handled by the Municipal Property Assessment Corporation (MPAC).
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Buying in the City of Toronto may require you to pay both provincial and municipal land transfer taxes.
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If you sell a secondary residence for a profit, you might have to pay capital gains tax.
Being aware of these different taxes helps you plan, budget, and make educated decisions about real estate. Whether you are calculating how much you can afford in monthly costs, or you are preparing to sell and want to know your expected proceeds, understanding the difference between property taxes and real estate taxes is a crucial step.
Posted by Maryann Jones on
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