Property Taxes Explained for Home Buyers

Buying a home means more than just budgeting for the purchase price and mortgage payments — property taxes are a major ongoing cost that every buyer must understand. Whether you’re a first-time buyer or upgrading, understanding how property taxes work will help you budget properly, compare neighbourhoods, and avoid surprises after closing.

1. What Are Property Taxes?

Property taxes are annual fees paid by homeowners to their municipality. These funds support essential services such as road maintenance, garbage collection, police and fire departments, schools, and local infrastructure.

In Toronto and across Ontario, the Municipal Property Assessment Corporation (MPAC) determines your home’s assessed value, which becomes the basis for calculating your property tax bill.

Formula:👉 Property Tax = (Assessed Value) × (Municipal Tax Rate + Education Tax Rate)

2. How Property Taxes Are Calculated

Your total property tax depends on two main factors:

• Assessed Value – MPAC reviews sales data and property characteristics to estimate your home’s market value.

• Tax Rate – Each municipality sets its own rate annually, depending on its budget and service needs.

For example, if your home’s assessed value is $800,000 and your city’s combined tax rate is 0.7%, your annual tax would be about $5,600.

In Toronto, the rate is around 0.70%, while surrounding cities such as Mississauga and Markham may differ slightly. Even small rate changes can affect your yearly costs.

3. Why Property Taxes Matter for Home Buyers

When comparing homes, buyers often focus on price — but tax rates can vary widely between neighbourhoods. A lower purchase price in an area with higher taxes may cost you more each year than a higher-priced home with lower taxes.

Understanding property taxes helps you:

• Estimate true monthly ownership costs.

• Compare affordability between cities and neighbourhoods.

• Plan for annual tax increases or reassessments.
  

📍 Tip: Use your realtor’s market insights to compare municipal tax rates when deciding between neighbourhoods like Riverside Square, Waterfront, and Financial District Toronto condos.

4. When and How Property Taxes Are Paid

Most homeowners pay property taxes in installments (typically four times per year) or through their mortgage lender’s escrow account.

If you buy mid-year, your lawyer will adjust for taxes already paid by the seller, so you only cover your portion. Keep copies of these adjustments for your records — they’ll be needed for your closing statement and future budgeting.

5. What Affects Property Tax Changes

Property tax bills can change for several reasons:

• New Assessment: MPAC updates your property’s assessed value periodically.

• Municipal Budget Changes: Cities may raise rates to fund infrastructure or new services.

• Renovations: Adding a deck, pool, or finishing a basement can increase assessed value.

• Neighbourhood Growth: Rising home values in your area can push your taxes higher.

If you believe your assessment is inaccurate, you can file a Request for Reconsideration (RfR) with MPAC.

6. Strategies for Managing Property Taxes

• Compare neighbourhood rates before buying.

• Confirm annual tax estimates with your realtor before making an offer.

• Appeal unfair assessments through MPAC.

• Budget monthly: divide your annual bill into 12 payments to stay consistent.

• Review tax bills yearly to catch rate changes early.
  

7. Average Property Tax Rates in the GTA (2025 Snapshot)*

*Rates sourced from wowa.ca, 2025 data.

Conclusion

Understanding property taxes is key to being a smart home buyer. It’s not just about what you pay to purchase — it’s what you’ll pay every year to own. By learning how assessments and rates work, comparing cities, and planning ahead, you’ll make a more informed buying decision and avoid unexpected costs down the road.

For tailored advice or listings that fit your budget, contact RE/MAX Plus City Team — your Toronto real estate experts.

FAQs

Q1. Are property taxes based on the purchase price? No. They’re based on the assessed value determined by MPAC, not necessarily what you paid.

Q2. Can property taxes change after I buy a home? Yes. Rates and assessments are updated regularly and can increase based on local budgets and home improvements.

Q3. Who sets property tax rates in Ontario? Municipalities set their own rates each year, combined with an education tax rate set by the province.

Q4. How can I lower my property tax bill? You can appeal your assessment if it’s inaccurate, or apply for local rebate programs if you qualify.

Q5. When are property taxes due in Toronto? Typically four installments per year — March, May, July, and September.