Will You Be Paying Too Much In Property Taxes?

Every 4 years, the Municipal Property Assessment Corporation (MPAC) re-assesses all properties.  Like the US presidential election cycle, MPAC will be re-assessing 2020.  If MPAC over estimates the value of your property, you will be overpaying property taxes for the next 8 years.

Property taxes are derived by multiplying the property tax rate by the phase-in assessment.  The property tax rate is established every year by the city of Toronto while the phase-in assessment is calculated using the assessed value estimated by MPAC every 4 years. 

The 2020 assessed value forms the basis for phase-in assessments for the subsequent years from 2021-2024.  Furthermore, the 2020 assessed value will become the starting phase-in assessment for the next four years of property taxes from 2025-2028, hence an 8 year impact based on the 2020 assessed value.

The following illustration shows the impact if MPAC estimates a 2020 assessed value of $800,000 instead of $750,000 (ie. over estimation of $50,000).

We will assume that the assessed value for 2016 assessment was $600,000.  This becomes the starting phase in value for 2020 property taxes.

Since the 2020 assessed value becomes the starting phase-in assessment for 2025-2028, in order to quantify the impact of an over estimated 2020 assessment, we will assume a 2024 assessed value of $900,000 and apply forecasted property tax rates based on the past 5-year trend.

Note 1 – The projected Toronto tax rate declines by 3.2% year over year which is the 5 year average decrease.

In summary, if MPAC overestimates the 2020 assessed value by $50,000 in 2020, a home owner will be overpaying by property taxes by approximately $1,047 total over the next 8 years.

Feel free to let me know if you need a hand to review your assessment.  Our property management company has been successful with lowering many of our clients’ assessments.

Toronto’s November real estate results reflect the continued trend of limited supply and low interest rates resulting in higher level of sales and prices when compared to November 2018 (you will need to download images to see the table below).  Please let me know if you’d like more specifics on your area.

3 things I’m noodling through:

  1. I just finished reading David Schwartz’s “The Magic of Thinking Big”.  Even though it was first published in the 1959, it’s a timeless read about developing leadership, thinking creatively and investing in relationships. I’m typically risk adverse and prone to focus on too much on the downside when looking at reasons for change. This book is challenging me to be optimistic and no pun intended I’m really looking forward to 2020.
  2. My wife has been taking up some interest courses this past fall: knitting and improving her French. I’ve been on the receiving end of her knitting projects, but I realize that being in the pilot program in the French Immersion stream wasn’t really effective for me as I struggle with the materials she’s working through. Anyhow, this got me thinking that I should get into a new hobby. Anyone have any interesting hobbies that you’d suggest I try in the new year?
  3. As the year comes to a close, I’d like to express my gratitude and appreciation to my clients that have entrusted me to help achieve their real estate goals. I love what I do, especially when my clients find houses that become homes that are places of refuge, where fond memories are made and hospitality is given.

What are your plans for the next ten years? Have you made any “new decade” resolutions yet?

If your goals or dreams include finding a new home, or enhancing the enjoyment of your current property, I want you to know that I’m here to help.

So, even if it’s just to say “hello”, give me a call. I’d be delighted to hear from you!

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