The Property Tax Playbook: Decoding Your Bill & MPAC Assessments 🏦

This episode explains how MPAC conducts property assessments in Ontario through direct comparison methods, with a focus on residential properties and the factors influencing their value. The assessment cycle operates every four years with a phase-in process for value changes, though the 2020 postponement is still affecting current values. The episode concludes with an overview of how municipalities calculate property taxes based on assessed values, including details about tax rates, dispute processes, and various tax relief programs.

Ciao! Welcome to a new episode of Building Wealth Through Real Estate...Brick by Brick with me, Nico James-Bock, Founder of The CondoWiz™ Group and Broker at Keller Williams Co-Elevation Realty in Toronto.  

What Should You Do Next?

• Review your Property Assessment Notice (PAN) carefully. This document details your property's assessed value and property classification.
• Utilize MPAC's AboutMyProperty™ tool. This free online service allows you to compare your assessment to similar homes in your neighbourhood and review the information MPAC has on file for your property.
• Consider filing a Request for Reconsideration (RfR) if you disagree with your assessment. You have a limited window to do this, so act promptly if you believe there's an error.
• Budget for your property taxes. Understand your payment due dates and explore options like pre-authorized payments to avoid penalties.
• Stay informed about municipal and provincial programs. Look into potential tax relief initiatives or deferral programs that may be available.
• Keep MPAC updated on significant changes. If you undertake major renovations or additions, notify them to ensure your property information is accurate.

Links

The Seniors and Persons with a Disability Property Tax Exemption provides financial relief on a portion of a property’s value if improvements were made to a residential home to accommodate a senior (aged 65 or older) or a person with a disability.

City of Toronto Property Tax, Water & Solid Waste Relief
Apply online for the 2025 Property Tax, Water & Solid Waste Relief Program. Deadline to apply is October 31, 2025.

Ciao 😊

Transcript

Host Nico James-Bock: What do you truly understand about how MPAC assesses properties and assigns a tax code to determine your residential property tax? How do you understand the exact process for requesting a reevaluation or review of your assessed tax amount? And what do you know about the different tax classes?

Well, welcome to another brand new episode of "Helping You Build Wealth Through Real Estate... Brick by Brick" This is "The Property Tax Playbook," and I'm going to decode your tax bill and explain MPAC's role in the assessment process.

We'll cover: What is MPAC and its role in property taxation? What is the current value assessment, and why is it significant? For example, what are the five primary factors influencing residential property value? How does MPAC use the direct comparison approach when assessing value? What are the property assessment notice and the property assessment change notice? And what's the status of the provincial-wide assessment update cycle and its current postponement?

My name is Nico James-Bock. I'm a broker and Condo Whiz at Keller Williams Co-Elevation Realty in Toronto. In today's episode, I'm giving you the property tax playbook, describing the process of assessing property values and assigning a tax amount.

MPAC, which stands for the Municipal Property Assessment Corporation, is one of four key stakeholders in property valuation and taxation. The others are the provincial government, the municipalities, and, of course, the Ontario taxpayer.

The Government of Ontario passes legislation and sets assessment policies through the Assessment Act, 1990. This act determines MPAC's role, what properties are assessable and taxable, exemptions, adjustments, valuation dates, assessment notices, and property assessment appeals. These are all the provincial government's responsibility.

Then we have MPAC. MPAC classifies property types and conducts Current Value Assessments, or CVAs, of properties. These CVAs are the foundation of Ontario's property tax system. So, how do the people at MPAC determine property values?

We also have the municipalities. Approximately 444 Ontario municipalities rely on MPAC's assessment to determine municipal taxes. Each municipality determines its tax rate and collects property tax to pay for municipal services like police and fire, public transit, and waste management, among others.

Finally, we have the Ontario taxpayer. Your property tax payments fund the municipal services I just mentioned. The amount of property tax owed is based on your municipality's tax rate, calculated using MPAC's assessed value.

When assessing residential properties, MPAC uses the direct comparison approach. This involves reviewing sales records, scouting MLS listings, and keeping their research relevant to the type of property being assessed.

The most common types of property assessed by MPAC are residential, multi-residential, commercial, industrial, farm, and conservation land. For this episode, I'll focus on residential properties. This includes all types of residential properties, such as single-family detached or semi-detached homes, townhomes, condominiums, waterfront properties (like cottages or year-round homes with waterfront access), and seasonal dwellings (cottage or vacation properties without waterfront access). For property classification purposes, this also includes duplexes and properties with up to six self-contained units, as they pay property tax at the same residential tax rate.

There are three approaches to evaluating property. I mentioned that MPAC uses the direct comparison approach, where recent sales of comparable properties are analyzed to determine the value of the property being assessed. The income approach is used for analyzing a property's income, primarily for multi-residential properties with tenants, as well as office buildings and shopping centers. Then there's the cost approach, a three-step process to assess unique properties like industrial sites, commercial non-GTA properties, warehouses, marinas, and gravel pits. We'll concentrate on the direct comparison approach, as that's what MPAC uses for residential property value.

Let's look at the five common residential value factors. These factors establish approximately 85% of a residential property's value. MPAC uses these five factors: location, lot size (for detached, semi-detached, freehold properties), square footage, age of property, and quality of construction.

So, where does the remaining 15% of a residential property's value come from? MPAC also considers amenities like fireplaces or if the property has a pool. They use unique features as a factor, such as if the property is on a corner lot, a cul-de-sac, or has Main Street frontage. These can have either a positive or negative effect on value. They also take secondary structures into consideration, like garages, sheds, or other structures physically located on the property. In total, MPAC uses approximately 200 factors when determining an assessment value for a property, including those I've mentioned.

Let's look at freehold properties first. Key value factors include location: the property's neighborhood and market area affect its value. Market areas can be urban, rural, waterfront, or condominium. Neighborhood value can change due to natural boundaries like a ravine or major streets, political boundaries, the desirability of the area, zoning (a big factor), and historical significance or heritage value. All this falls under location.

Next, square footage: The size of the property is an important factor. For assessment purposes, MPAC determines square footage using the exterior above-grade measurements of the structure to determine the total size. Keep in mind, this does not include basements, decks, porches, or garages—just the external perimeter walls of the structure above grade.

The age of the property is also very important. The value is influenced by the structure's age. Any major renovations or additions may change the overall effective age, not just when it was built. If these changes are significant, its value could increase due to less depreciation applied against the structure.

Then there's quality of construction: This is affected by the materials, architecture, and workmanship used to build the home. MPAC has a classification system, called the "quality class," to identify different levels of construction quality.

Now, for condominiums, the factors are similar, but a few others are considered. Location is still a shared factor. Value depends on whether the condo is in a large urban center, analyzed as an independent community, or in a smaller urban or rural center, where they are clustered together and adjustments are made for architecture or style.

Square footage is the primary driver of value for a condo unit. It's usually taken from plans and commonly calculated from the exterior of the hallway wall to the exterior wall of the unit, to the center point of the common wall between units. That's how MPAC typically determines square footage. The age of the building is also an important factor.

Other important factors for condominiums include the floor level. Units on the ground floor or higher elevations are typically valued at a premium—the higher you go, the higher the value. The number of parking spaces (some have none, some one, some two) and the number of storage lockers are also factors considered when assessing a condominium unit's value.

For waterfront properties, those with waterfront access, typically in cottage country or away from urban centers, location is once again a crucial factor. This also considers the specific body of water the property is on or adjacent to, and the amount of water frontage. Shoreline type (rocky, sandy, or marshland), the predominant exposure of the property (e.g., north or east-facing), and sanitary services like a septic bed are also taken into consideration.

Secondary structures, such as a boathouse, deck, bunkie, or cabin, are assessed if the property has waterfront exposure. Other factors MPAC considers for waterfront properties include seasonal water access or any water access at all, hydro services, topography, whether it's an island versus mainland, the water source, heating type, and if there are fireplaces in the property.

MPAC uses what is called an assessment cycle. They conduct a province-wide assessment update every four years. These updates establish assessed values of properties as of a set valuation date. These assessed values are then used to calculate property tax for the next assessment cycle.

Property assessments through the end of 2020 continued to be based on January 1, 2016, current values. This is because there was an assessment update postponement in 2020. So, while cycles typically ran in four-year blocks (e.g., 2013-2016 and 2017-2020), since the 2020 cycle was postponed, the January 1, 2016, assessed value is still considered the last valuation date.

An assessment roll is an annual list of the assessed values of all properties in a municipality. Even though there's a four-year assessment cycle, assessments take place all year long. MPAC provides an annual list of these assessments to each municipality. During non-assessment years, MPAC assesses new home builds, records recent renovations and additions, tracks recent sales, and utilizes building permits, which trigger property updates or renovations.

Requests for reconsideration, which we'll discuss later, are for MPAC to reevaluate taxes if a property owner requests a review. MPAC continuously adds to the assessment roll by assessing homes all year long when there are changes. A Notice of Assessment is then issued to the individual homeowner, not province-wide, if changes or occurrences took place during the year.

The phase-in process is used by MPAC to mitigate changes in value. Property assessments are completed every four years. For example, the increase in value between 2012 and 2016 was divided by four and added to the property's value equally over the next four years. So, if a home valued at $200,000 on January 1, 2012, was valued at $300,000 on January 1, 2016, that $100,000 increase was divided by four. The increase in value was attributed to the property's value over the next four years, and the tax rate was applied to that value, resulting in a year-over-year tax increase.

So, for example, in 2017, the $200,000 initial value plus $25,000 becomes $225,000. Similarly, in 2018, $225,000 from the previous year plus another $25,000 brings it to $250,000, and so on, until 2020, when the value reached $275,000 plus $25,000, bringing the property value to $300,000. Note that the homeowner didn't pay property tax on the full 2016 assessed value until the last year of the phase-in, which was 2020. This provision was introduced to provide taxpayers with some stability and predictability. MPAC will send an assessment notice indicating your phased-in value, which will show the increase in tax over the next period.

If I look at a condominium valued in 2016 at $200,000, its phased-in assessment in 2025 is still $200,000 due to the 2020 postponement. So, for this next period, MPAC is maintaining the value from the 2020 postponement. A new cycle will now begin in 2025, 2026, 2027, and 2028, and we will see what the value is in the next four years.

Value decreases are applied immediately by MPAC. Municipalities use a property's phased-in value for the current year to calculate property taxes. If there is a value decrease for a property, the new assessed value is applied immediately and all at once in the first year of the next cycle. Property tax will then be calculated using the total current value assessment in each of the next four years. It's important to note that if there are no physical changes to the property over the next four years, the total current value assessment likely won't change until the next assessment update. That's why you're not noticing any appreciable increase in taxes—it's simply due to that postponement period.

Property changes that affect value, such as renovations and upgrades, may include additions like a deck or a swimming pool, or detached garages. Municipalities forward building permits to MPAC, as you must apply for a building permit for such changes. These permits flag properties for inspection. The sale of a property may also trigger an MPAC inspection.

So, how does a municipality determine its tax rate? The tax rate is determined by the municipal cost of services (the total of all those services) divided by the combined value of all properties in the municipality. This gives you the municipal tax rate, expressed as a percentage. That property tax, which is a phased-in assessed value over four years, is multiplied by the municipality's property tax rate to arrive at the property tax amount, expressed in dollars. That's what you see on your tax bill.

What are the types of property classes? The tax rate used by the municipality depends on its property class. Residential property tax is currently taxed at a 0.93% rate. Commercial occupied is taxed at 2.22%, commercial vacant at 1.93%, and farmland at 0.23%.

On your tax bill, taxpayers fund municipal services through property tax payments. The amount of property tax owed by a property owner in Ontario is based on their municipality's property tax rate. Individual tax amounts are determined by multiplying the applicable property tax rate, set by the local municipality, by MPAC's assessed value.

What if you want to dispute or disagree with the assessed value and the amount of taxes you're paying? You can file a Request for Reconsideration (RfR) directly with MPAC at no cost. It can be filed by the property owner or their authorized representative. RfR deadlines are printed on property assessment notices, so you'll see the deadline once you receive your notice.

Individuals may choose to file a request for reconsideration if they believe a property's value is too high, if property data on a notice of assessment is incorrect, if there's an error in the property classification, or if an incorrect property assessment change notice was issued. These are all valid reasons to request a reconsideration.

Beyond the Request for Reconsideration, you can appeal MPAC's decision. RfR decisions typically take around 180 days and are mailed to you. Appeals must be filed online, along with payment of fees, within 90 days of receiving MPAC's RfR decision. The Assessment Review Board will set a commencement date and provide a schedule of events. Appeals are heard in either a summary proceeding or a general proceeding (for non-residential properties). Evidence is presented and reviewed at the hearing, and the Assessment Review Board makes a final decision.

That gives you a good overview of MPAC's role in assessing value and determining property taxes based on the property tax rate. Municipalities determine how much tax you pay based on MPAC's assessment of the property multiplied by the municipal tax rate.

Now, I want to briefly talk about saving your pennies. There are exemptions, deferrals, and programs available. In particular, the Seniors and Persons with a Disability Property Tax Exemption through MPAC provides financial relief on a portion of a property's value if improvements were made to a residential home to accommodate a senior (65 or older) or a person with a disability. This may include renovations or modifications to an existing residential home, construction of a custom-built home, or use of a temporary garden suite with a property-specific bylaw or order under the Planning Act.

Also, the City of Toronto has a Property Water and Solid Waste Relief Program. You can apply online for the 2025 program. The deadline to apply for 2025 is October 31st. You can learn more about the program and eligibility by clicking on the link I will provide.

Just some final words: understanding property tax due dates and payment options is crucial. You can set up pre-authorized payments or pay by installments. Consider the impact of major renovations or new construction on your assessment. Of course, renovations should improve a property's value, which should be the driving factor, but be aware of the tax implications. It's important to keep MPAC updated on property changes, so file for necessary permits. Regularly review your property assessment notice, as there could be an error or something you disagree with, and you have recourse for that. And, of course, budget for property taxes throughout the year. You'll receive notices for interim and final taxes, so make sure you budget for those. Finally, remember resources for further information like MPAC's website, municipal tax departments, and homeowner associations.

That wraps up another insightful episode of "Helping You Build Wealth Through Real Estate, Brick by Brick." I hope this deep dive into your property tax bill and MPAC assessments has equipped you with the knowledge and confidence to understand this important aspect of homeownership. Remember, information is power, especially when it comes to your financial future in real estate. This is also useful for those who are currently renting, because eventually, the goal should be to own property if you want to build wealth. When you pay rent, you are paying your landlord's mortgage and their property taxes and other expenses, so you might as well do it for your own property.

All of the information can be found on my various social channels. You can easily find me on LinkedIn, Facebook, etc., or just reach out to me directly. Don't forget to leave a comment if you find this useful, and I encourage you to share the podcast. Ciao ciao.