After months of hunting, you’ve finally found your dream home. Congratulations! But before making an offer, have you looked into how much the property taxes are in the municipality where it’s located? Unlike a rental apartment, you’ll have to factor property taxes into your budget. As you’ll see when you use our mortgage calculator, higher property taxes will mean you’ll have to lower your budget. But how are property taxes calculated? Why do they change from one year to another? Read on to find out!
Where does your tax money go?
Property taxes are made up of all the taxes an owner must pay on their property and mainly include municipal and school taxes. These are an important source of funding for cities and school boards, even though people tend to get frustrated when they go up. With your taxes, you’re helping finance various municipal services, such as wastewater treatment, garbage collection, public transit, police, and road repairs, as well as school building maintenance, lighting, and heating.
How are property taxes calculated?
To calculate how much you’ll have to pay once you own the property, municipalities and school boards primarily use two pieces of information: the market value of the property and the tax rate.
To determine the market value of a property, municipalities and school boards consult the property assessment roll, an inventory that assigns a market value to all properties within their jurisdiction.
The tax rate, the other piece of information used to calculate taxes, is usually reviewed each year. It’s not uncommon for municipalities to adopt several different tax rates, such as a general tax rate, an infrastructure tax rate, and a tax rate for municipal debt. If you live in a big city like Montreal, you might know that the boroughs also set their own tax rates, in addition to those in the central city.
Example of municipal tax account
| Description of the tax | Tax base (property value) | Tax rate | Amount |
| General funds | $250,000 | $0.5/$100 | $1,250 |
| Infrastructure | $250,000 | $0.03/$100 | $75 |
| Debt | $250,000 | $0.01/$100 | $25 |
| Total | $1,350 |
The property assessment roll
On January 1, the new property assessment rolls come into effect. However, the market value of the properties listed in these rolls does not represent the value on that date, but rather the market value 18 months earlier. For instance, if your city’s property assessment roll came into effect on January 1, 2019, the market value of your property dates to July 1, 2017.
Of course, appraisers in cities or regional county municipalities do not visit all the properties in their area every three years. Nevertheless, they are obligated by law to visit them at least once every nine years.
How is your property assessed?
During the visit, the appraiser will note all the elements that could increase or decrease the value of your property, such as lot size, location, building age, dimensions, siding, and the quality of interior materials. If your house is new and located in a popular neighborhood, it will be worth more than a poorly maintained house located across from a factory.
With this information in mind, the appraiser will determine the value of your property using one of three possible approaches: comparison, replacement cost, and income. Most appraisers use the first approach, which consists of comparing the appraised property to other similar properties that have recently been sold in the same area, making adjustments as needed. Want to learn more about assessment methods? Read our article.
What’s next?
Once this analysis has been completed, the appraiser can determine the market or real value of your property—that is, the price a buyer would pay to acquire it by mutual consent in a competitive market.
While the property assessment roll can be a useful tool in real estate transactions, it is not foolproof. Exercise caution if the municipality is set to update it in the near future. No home is immune to water damage and, in three years, the value of a property can fluctuate enormously.
Can you appeal your property assessment?
Of course, you may not agree with your property assessment, especially if its value has skyrocketed for no apparent reason. But you need a valid reason to appeal it. For instance, the value of your property may have dropped drastically because of an issue with the foundation, a natural disaster, or depreciation in your area.
Request a review from your municipality before going to court
Before going to court, you must directly request that your municipality or regional county municipality review the assessment. However, to make a request, you usually only have until May 1 after the new assessment roll has come into effect or 60 days after the assessment notice has been sent.
Generally, you will receive an answer by September 1. If you aren’t satisfied with the decision, you can lodge an appeal with the Tribunal administratif du Québec. You have 60 days to do so.
Be aware that the procedure can be long and expensive, especially if you have to go to court. You may need to hire a chartered appraiser or a lawyer who handles municipal law, which can be expensive. Make sure the request is justified and will lead to significant savings in property tax.
Key takeaways
- Property taxes include municipal taxes and school taxes. They must be paid by the property owners.
- The market value of your property and tax rate affect the amount of property taxes you will pay.
- You can always appeal your property assessment. However, since the procedure can be long and expensive, you’d better have a good reason.