Home Owner Tax Fighter Guide
Tips To Ensure You Pay Your Fair Share Of Property Taxes - And Not a Penny More!
- How your property taxes are calculated.
- How you can tell whether your assessment is fair.
- How to appeal your assessment.
Note to the Homeowner: In our opinion, most assessment authorities try to be fair in assessing your property. Given the sheer number of properties they must assess, however, it is almost impossible for them to be fair to everyone. Your concerns and input to the assessor is vital if the system is to work fairly for all concerned. It is your right, and responsibility, to work with the assessors to ensure that your assessment (and taxes that result from it) are fair in relation to all other taxpayers in your community.
How To Use This Report
Read this report first. It will give you a good understanding of how property taxes are levied and a useful "checklist" or blueprint to follow should you decide to appeal your taxes. Keep this report with you. Use it to make notes and write down questions.
If anything isn't clear, or you need some expert help, call Steve Klassen. Steve is well informed about how the property tax system works in your area. He will be pleased to offer advice, at no cost and no obligation.
RE/MAX is the real estate company that cares the most and does the most to champion the interest of Canada's homeowners and homebuyers.
To the best of our knowledge, the information in this report is accurate everywhere in Canada. We've gone to considerable lengths to research this information carefully but the property tax system is complex and varies from place to place, so some facts may have slipped through our net. If we've missed something, please let us know.
All Canadian homeowners have something in common. Every year we get a bill for property taxes. And every year we're at least a little mystified by it.
We ask ourselves:
- Am I paying more than my fair share?
- If I am paying too much, how do I go about paying less?
Getting answers isn't easy. In many parts of Canada the property tax system isn't "user-friendly". Sometimes it's hard to reach the right government official to get answers to your questions. Sometimes the answers themselves are hard to understand. Figuring out your choices and your rights can be frustrating and intimidating.
That's where the Homeowner's Tax Fighter Guide is designed to help!
Its purpose is to guide you through the maze, give you plain answers, and tell you where you can get more information if you still have questions. So...let's get started!
The Property Tax: How It All Began
Property taxes have been around since the Roman Emperor Augustus brought in the first property tax almost 20 centuries ago. Today property tax is the financial backbone of local government all over North America, and is the source of most of the funds that pay for police, fire, local road and sewer and other municipal services. These services vary from community to community.
All of us should pay our fair share for these services. The problem arises when the property tax is applied unfairly, causing some people to pay more than they should.
When this happens, it usually isn't because the tax assessor is sloppy or unfair, it's because tax assessors have to make a lot of assumptions and sometimes these assumptions (or even the government's records) are faulty.
How The Property Tax Works
The property tax is based on what the government thinks your real property - the buildings and land you own - is worth. The key word there is "thinks." In principle, it works quite simply:
Tax assessors calculate what they think is the fair market value of every property in the municipality. In some municipalities they do this every year. In others, it can be years between assessments.
The municipal government makes up its budget for the year. It divides that budget into the total assessed value of all the properties in the municipality. The result is what is called the "mill rate". This mill rate is expressed as so many dollars of taxes per year per $1,000 of assessed property value.
In most places you can appeal the assessed value of your property, but not the property tax itself. Once you have accepted the assessor's opinion of your property's assessed value, the calculation of the actual property tax is automatic.
In other words, you can't appeal your "taxes". You can only appeal the government's assessment of your property's value. If you think their assessment is too high, you have to produce evidence that shows the assessor made a mistake. Later in the report, we will show you how.
Assessments, Mill Rates, and Taxes: How They Work
- Assume your municipality has a budget of $1.5 million this year.
- Assume the total assessment of all properties in your municipality is $750 million.
- In this case, the mill rate will be $1.5 million divided by $750 million, or 20 mills. (In other words, $20 of tax per $1000 of assessment).
- If your property is assessed at $300,000, then your property tax will be $300,000 times 20 mills per thousand dollars of value, or $6,000 per year.
How Do They Determine "Assessed Value"?
The actual value of buildings and land fluctuates and depends on many factors. In order to estimate a value for tax purposes, the government employs Tax Assessors. These officials produce an "assessment" of the value of your property based upon the price they think your property would fetch if it were sold in the open market at a fair market price.
This doesn't mean that the Assessor comes out each year and checks your house to see what he thinks it is worth. Instead, to try to stay current, assessors feed market information into a computer that compares similar properties and calculates a blanket appraisal by a certain date. These mass appraisals are usually done by comparing information about your property to similar properties recently sold in your neighbourhood or town.
In addition to these "mass appraisals", assessors get information about your property from other government departments. For example, if you apply for a building permit to build a garage, the local government department forwards the details to the assessment authority, who includes the value of your new garage when appraising your property's value. The exact time of year that properties are appraised varies from province to province, and from municipality to municipality.
Important Point To Remember: The process of "mass appraisals" is not an exact science. The government makes mistakes and these mistakes can unfairly increase your taxes. The only way to be sure your assessment is fair is to check into the records. We'll show you how to do this.
Why Does The Assessed Value Of Your Property Change?
Rising or declining property values in your neighbourhood can have a major effect on your assessment, because assessors look at the sale price of properties like yours. Another thing that can increase the assessed value of your property (even if the neighbourhood property values haven't changed) is renovation. Renovations, not only to a home but also to other buildings like garages, barns and storage buildings, can make a property more valuable. (In case you wondered, normal residential maintenance, eg. keeping the grass cut or planting a garden, doesn't increase or decrease the market value significantly).
Here's what's important to remember. The assessed value of your property is a professional opinion based on the expertise of the appraiser and the accuracy of the information on file. Just because an assessor says your property has increased in value doesn't mean that it is so. Assessment methods can lead to wrong calculation. (We give you some examples later on in this report).
If Your Assessment Goes Up, Must Your Taxes Go Up?
Not necessarily. Let's say the municipal government kept its spending flat this year. Let's also assume that everyone in town received a higher property assessment (perhaps a new industry was opening nearby, and land prices went up). In a case like this, no one's taxes would rise, because the mill rate would drop by the same amount as the increase in the overall assessment. In other words, the higher assessment would be canceled out by a lower mill rate.
Unfortunately, in the real world it seldom works this way. Most of the time, governments don't hold the line on spending, they increase it. So both the assessment and the mill rate rise.
The threat to your interest comes from the fact that your assessment may be unfair compared to those of other, similar taxpayers. In that case, you'll be charged a higher property tax than you deserve. What you have to focus on is ensuring that your assessment is properly done and fair. And that's the goal of The Homeowner's Tax Fighter Guide.
What Can You Do If You Disagree With The Assessment Authority's Calculation of Your Property's Value?
Every property owner has the right to review government records on his or her property and the right to question the assessed value.
Assessment authorities are public servants and usually are willing to assist you in making sure your property is accurately and fairly assessed. Before consulting the assessment authority, it is best to have an understanding of how the process works. Follow the steps outlined in the Assessment Appeal Checklist.
If You Have Discussed Your Assessment With The Local Assessment Office And Still Disagree With Their Evaluation, What Should You Do?
Merely believing that your taxes are too high is no basis for lowering an assessment value. To successfully appeal an unfairly high assessment, you must present evidence that proves one or more errors in how the appraiser appraised your property. If you have followed the Assessment Appeal Checklist, met with an assessor and still disagree with his or her opinion of the value, you usually have the right to appeal to a higher authority that is independent of the assessment office.
One warning: Don't expect your appeal to be heard quickly. In several provinces there are lengthy backlogs of appeals already in the system.
What If I Appeal, And They Increase My Assessment?
There is no guarantee and you have to take the chance. However, the odds are good that it won't happen. According to a 1992 study done in one province, when people appealed their assessment to the second level of appeal, over 46% of cases received reduced assessments, 50% were unchanged and only 3.5% received a higher assessment. So if you do your homework and you have a strong case, the odds are on your side.
Are There Any Tax Relief Programs Available For Property Owners?
Some areas offer tax relief programs or tax exemptions for certain kinds of property owners. For example, in some provinces there is tax relief for:
- People who employ energy-saving devices such as solar panels.
- Volunteer firefighters.
- War veterans, low income families, senior citizens or widows.
- Check with your local assessment office to see whether tax relief is available in your municipality and whether you qualify for it.
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ASSESSMENT APPEAL CHECKLIST
The key to protecting your interest from the tax man is to do your homework and document your case properly! Follow these steps and check each one off when you have completed it.
Read your assessment notice carefully. Compare your assessment to the previous year. Does your new assessment seem fair?
If you think your assessment is unfair, consult this report for information on how the tax system works in your province and your municipality. Please note the important information deadlines for filing an appeal.
Familiarize yourself with the tax terms in the glossary at the end of this report. Knowing the language will help when you talk to an assessment officer.
Visit the assessment authority and review all public records on your property (deed, title, roll and field report cards). Many offices will have a helpful assessment answer book that tells how the process works in your province. Take a few moments to read their suggestions.
Obtain the facts on the actual sale price of properties like yours:
- Listings of all properties similar to yours that sold in your area recently. If only a few were sold, go back further in time. (Ask assessment staff to explain the resources available to you).
- Contact Steve Klassen at 604-534-3008.
Review how the tax assessor has described your own property record. Note any blatant inaccuracies. Have they made errors in measuring the size of your lot, or the square footage of living space (or non-living space) in your home? Have they erred in describing any of the features of the property itself? For example, have they said there are two fireplaces when there is only one?
Write a letter clearly outlining the inaccuracies you discovered. All appeals must be in writing.
Most provinces require property owners to fill out an appeal form as well. The name of the form will vary. For example, in one Province it is called a Prescribed Letter Of Agency Form.
Remember to pick up information on any tax relief programs and any available exemptions or reductions (eg. low income families, widows, war veterans, properties with solar panels, etc...).
Be prepared to substantiate your claims with proof of property size and, if possible, provide pictures.
Remember, you have to prove that your home has been given too high of an assessment relative to other properties like it. If possible, find several comparable homes that have sold recently in your area and determine their selling price.
Finish assembling your case. Gather copies of all the supporting documents you will need. For example: a copy of your latest tax assessment notice, a copy of your deed to the property, a copy of the real estate bill of sale if you purchased your home recently (this is proof of its market value). Call the Assessor's office and ask for a copy of the record that the Assessor filled out describing your property.
Mail your letter to the correct address for appeals WITHIN THE TIME ALLOWED. (Consult the information sheet for your province).
- Make an appointment with your area assessor to discuss the letter. Ask the assessor what factors he or she takes into account when making an appraisal.
Remember, many factors, if brought to an appraiser's attention, could lower your property assessment. Market forces play a direct role in property values, including:
Unfavourable zoning changes near or around your home.
Lack of services or amenities (garbage collection, street lights, etc...).
Environmental problems (poor air or water quality).
Additional factors in and around your home also may win an abatement or reduced assessment. For example:
You may live next door to a property whose landscaping offends most people's sensibilities.
There may be "quality of life" factors near your property (eg. a motorcycle gang just moved in next door).
You may have a poorly designed floor plan.
Your insulation may be inadequate.
You may lack sufficient storage area.
Your plumbing or heating system may be inadequate.
Unless the assessor has actually visited your property (and often they do not), he or she has no way of knowing about these facts unless you speak up. Many assessors are reasonable people; sometimes explaining the facts will encourage them to re-assess the property (although usually you must file a written appeal to ensure that this happens). Assessors deal in appearances and averages. If your home has received too high an assessment, it may be because the assessor is unaware of something about the home, or the neighbourhood that lowers the real value. You must identify what that "something" is, and bring it to the attention of the tax assessment office.
In most provinces, if you meet with the appraiser and continue to disagree with the assessment, you may file another appeal with a higher authority. The assessor will advise you of the next steps. When appealing the second time, be sure to limit comments and correspondence strictly to assessment matters, clearly outlining your argument and supporting evidence for the appeal. (At this level, ground for appeal must be improper classification, exemption and inaccurate data on comparable properties sold recently).
And Remember: When in doubt, ask Steve Klassen for information or advice. He'll do everything he can to help, and of course there's no obligation.
There are a number of good references you can consult for additional information. Start with your assessment office. Often they will have pamphlets or guides for the taxpayer.
Glossary of Property Tax Terms
Abatement: A reduction in the assessed value of a property.
Appraisal: An assessor's opinion of value of a property and its improvements.
Assessment: The official valuation of property for taxation.
Assessment Notice: An annual notice mailed to property owners stating the assessed opinion of value. (See the information sheet with specific details on your area).
Assessor: A professional who gathers, records and evaluates property to determine an opinion of value for taxation purposes. Assessors do not determine tax rates or collect property taxes.
Deed: A legal description that conveys ownership of real property.
Easement: The right to use, without ownership, a portion of an owner's property.
Field Card: A record filled out by tax assessors. Contains all relevant details about your property as viewed by an appraiser.
Homeowner: Someone who enjoys the rights and privileges of property ownership and is subject to paying taxes on the assessed value of land and improvements.
Improvements: Anything built or added to land to increase its value (garage, swimming pool, barn, etc.).
Mass Appraisal: Determining the value of specific properties by comparing similar properties in a specific area and appraising all land and improvements together.
Mill: One-tenth of a cent, a term often used to express real estate rates. Mill rates are usually expressed in dollars per $1,000 of assessed value.
Property Tax: Your share of the total cost to provide community services and fund local government spending.
Tax Authority: Regional Districts, hospitals and schools, and municipal and provincial governments set tax rates based on the total assessed land value. Property taxes are collected from owners to pay for government services, debt, etc.
Tax Rates: A portion of the government's operating budget divided according to each property owner's total assessed value of land. Tax rates are calculated using Market Value X Tax Rate = Property Tax.
Tax Roll: An official list of all taxpayers in a jurisdiction, their assessed property values, and how much tax each owes.