- How MPAC assesses properties
- Property Information
- What Happens Next?
- The Relationship Between Property Assessment and Property Taxes
- What is a Property Assessment Change Notice?
- Sample situation:
- Next steps:
- Sample calculation
- To Learn More
This guide will help you understand how property assessment works, and how it is connected to the property taxes you will pay on your new home.
How MPAC assesses properties
To establish your property’s assessed value, MPAC analyzes sales of comparable properties in your area. This method, called Current Value Assessment (CVA), is used by most assessment jurisdictions in North America. In addition, we look at all of the key features that affect market value.
When assessing residential properties 200 different factors are considered; however five major factors account for approximately 85% of the value:
- lot dimensions;
- living area;
- age of the property, adjusted for any major renovations or additions; and
- quality of construction.
Some other features that may affect value include:
- secondary structures such as garages, boathouses and pools;
- basement area (finished and unfinished);
- type of heating;
- air conditioning;
- number of bathrooms; and
Site features can also increase or decrease the assessed value of your property. These include:
- traffic patterns;
- being situated on a corner lot; and
- proximity to a golf course, hydro corridor, railway or green space.
When assessing the value of a property, MPAC gathers information from a number of sources, including:
- land title documents;
- building permits; and
- on-site property inspections and communication with property owners.
What Happens Next?
MPAC sends assessment information to the Municipal Clerk’s office in the form of an “assessment roll.” Then, municipalities set municipal tax rates, based on their local budgets. The municipalities then apply the tax rates to the assessed values of the properties to determine the amount of property taxes each property owner must pay.
The Relationship between Property Assessment and Property Taxes
The formula to calculate municipal property taxes in Ontario is as follows:
Assessed Value (MPAC)
Municipal + Education + Regional/County
(if applicable) Tax Rates
Total Annual Property Tax
For example, if the assessed value of a property is $300,000 and the total tax rate is 1.2%, the property taxes would be calculated as follows:
300,000 X 0.01200 = $3,600 per year.
The tax department of your local municipality can provide you with the exact tax rate that is applied to your property, including the breakdown between the municipal, education (set by the Ontario Government) and regional/county (if applicable) portions.
What is a Property Assessment Change Notice?
A Property Assessment Change Notice is issued by MPAC when there has been a change to your assessment during the property tax year – in your case, a new house was built.
- You have a 2,000 square foot home on a lot with a 40-foot frontage.
- The property was transferred from the builder to you, the new owner, and as of August 1 of the current year, the property was registered in your name.
- The assessed value of the lot is $100,000; the additional assessed value for the new residence is $200,000.
- The builder is responsible for the payment of property taxes on the property (in this example, on the lot) from January to July 31.
- At the time of closing, the lawyer for the builder and your lawyer will reconcile the amount of taxes paid through a statement of adjustments.
- After that, you are responsible for the property tax on the property.
- Shortly after the property is transferred and you move into the new home, MPAC establishes an assessed value for the new structure.
- A Property Assessment Change Notice showing this additional assessed value is mailed to you, the new property owner.
- In this example, the effective date for the increase in assessed value for the new home is August 1.
MPAC notifies the local municipality of all new assessments added to properties in the municipality. The municipality will then produce and mail a supplementary tax bill to the property owners. The effective date of the supplementary tax bill in this example is August 1.
An example of an actual calculation of the property taxes owing on a new home as a result of the property taxes owing on a new home as a result of the supplementary assessment is provided below:
Assessed value of new home: $200,000
Assumed local tax rate: 0.01200 (1.2%)*
Total Annual Taxes on new home: $2,400
Prorated Property Taxes from August 1 to December 31
- 5 months/12 months = 0.4166
Supplementary tax bill for the new home only is calculated as follows:
- 0.4166 X $2,400 = $999.84
Please note that the tax rate used in this example is for demonstration purposes only. Contact your local municipality's tax department to find out the tax rate that applies to your property.
This supplementary tax bill is for the new home. When a supplementary assessment is added to property, the municipality is entitled to collect additional property taxes from the date that you purchased your home, to the end of the current taxation year. You may also receive a tax bill that represents taxes owing on the land.
MPAC aims to assess all new residential buildings and additions within six months of their occupation. If your new home is not assessed during the year that you took ownership, you will still be responsible for the taxes from the date you purchased the property.
The Assessment Act allows MPAC to assess any new house that has been omitted from the assessment roll for the current and any part of all of the two previous years.
To Learn More
You can obtain detailed information about your property and up to 24 additional properties of your choice, free of charge, by logging in to aboutmyproperty.ca.
In reviewing your assessed value, you should consider all relevant sales of similar properties in proximity to your property. You should also select sales that are close to the legislated valuation date. In circumstances where there are limited sales or similar properties, the time frame for selecting sales and geographic area for comparable properties may be expanded.
Printable PDF version of the Guide to Property Assessment for Newly-Built Homes Brochure.