Taking the first step up the London Ontario real estate ladder can be a steep learning curve in terms of financial terms and how they affect you. The terms real estate and property taxes, which are frequently used interchangeably, are a source of confusion for newcomers to the real estate market. So, what exactly are property taxes and real estate taxes, and are they the same thing?
London Ontario Real Estate Tax Is A Type of Property Tax
Property tax is a yearly tax levied on London Ontario real Estate that is owned by an individual or an entity.
While a property tax is levied on London Ontario real estate, it can also be levied on items other than London Ontario real estate, depending on the laws of your jurisdiction. Larger possessions, such as a car or boat, can be included in this category. However, the most common property tax is that paid on real estate, which is why the terms property tax and real estate tax can both refer to taxes paid on real estate.
The term real estate cannot, however, be used to refer to property taxes paid on items that are not, of course, real estate.
Property Tax Rates In Canada
You may come across the terms mill rate and mill levy while researching property taxes – what they are and how they will affect your finances. These terms refer to the method by which your real estate tax is calculated. The mill levy is the tax rate levied on your property value. This means that if your London Ontario real estate is assessed at $500,000, your property taxes for the year would be $6941.415 at the associated mill rate (1.388283). This then applies to the overall value of the jurisdiction and helps determine how much revenue is required to run the community's necessary functions. This revenue is then distributed to the region's property owners.
Calculating Property Tax Rates
Property taxes are based on the value of the London Ontario real estate property, including both the land and any buildings on it. A property tax is a rate that combines municipal and provincial property tax rates. The rate is determined by the property's value and whether the property is residential or non-residential.
Following the initial appraisal of the property when purchased, an official tax assessor visits the property every one to five years to update the property's value and adjust the property (or real estate) taxes accordingly. The assessor can calculate the property tax and value in three ways: by performing a sales evaluation, using the cost method, or estimating the amount of income that would be generated if the property were rented.
Checking your tax card for comparable homes and their associated London Ontario real estate taxes is a good way to see if your property taxes are reasonable. Search for local and regional tax exemptions that apply to your property to see if you can reduce your property taxes.
Factors That Can Affect Property Tax Rates
As a function of your local government, governmental changes can affect the rate of your property tax. Some of the common reasons why property tax rates may shift include:
- Cuts in government revenue derived from grants or fees. Municipalities rely on fees and grants provided by the provincial and federal governments. Municipal property tax rates frequently shift to account for changes in the number of funds allocated.
- Increases in local government spending. Increased spending is the inverse of decreased municipal revenue. Despite being diametrically opposed in most ways, this scenario has an impact on the real estate tax rate (almost always an increase).
- Failure to pay property taxes. There are penalties associated with a property owner's inability to pay the mandated taxes in some municipalities. As a result, the owner's property taxes are frequently increased, either as a result of a fixed penalty or an interest rate on the amount owed. Fortunately, the property owner has complete control over this factor; as long as real estate taxes are paid in full and on time, additional expenses can be avoided.
- Exempt properties. Some properties are exempt from the standard property tax rate for a variety of reasons, the most important of which is that these properties have been deemed valuable to society, and further drawing from their income would have a negative impact on these valuable contributors. Farm houses, hospitals, churches, and schools are some examples of these properties.
Many other factors can influence the London Ontario real estate property tax rate within a municipality.
The Purpose of Property Taxes
If you don't know where your money is going, real estate taxes can appear to be a fair amount of money to a property owner. Property taxes, on the other hand, are another source of revenue for governments. The funds are then redistributed to various needs throughout the area, such as school construction and maintenance, city amenities, emergency services, and so on.
When you pay London Ontario real estate taxes, you are contributing to your community's services and infrastructure, which in turn helps to maintain or even increase the value of your home by creating a valuable community.
Staying Aware of Property Taxes
Once you have a solid understanding of property taxes, from how they are calculated to their purpose, staying educated is the best way to ensure that you are paying the correct amount. This includes staying up to date on your municipality's changing rates and spending from year to year, learning about any deductions you may be eligible for, and taking an active role in your property's assessment.
From buying and selling tips to housing market outlooks, you can make the most of your London Ontario real estate decisions with RE/MAX. Looking for London Ontario Real Estate? Search MLS listings today to find you next dream home. Contact Realtown owner Yasir Khan, Sales Representative at RE/MAX.
