How property tax is calculated, what new owners pay, and how to appeal
Property tax is a significant and recurring cost that catches many new homeowners off guard — both the amount and the mechanics. Here's what you need to understand before you buy.
Property tax = assessed value × mill rate. Your municipality assesses your property's value (annually in some provinces, on a cycle in others). The mill rate is set by the municipality and often includes a provincial education component. On a home assessed at $700,000 in Toronto with a combined rate of approximately 0.66%, annual property tax is about $4,620 — or $385/month. Rates vary dramatically by municipality: Hamilton's rate is higher than Toronto's; suburban areas differ from urban cores. Always ask the selling agent for the current property tax amount before making an offer.
Assessed value is determined by MPAC in Ontario (or equivalent provincial bodies elsewhere) and often lags market value by 1–3 years in rising markets. New homes are frequently reassessed the year after purchase, which can trigger a significant increase in property tax that you were not warned about. You can appeal your assessment if you believe it overstates the value — the process is free and worth doing if your assessment seems high relative to what comparable homes sold for around your assessment date.
If you have a mortgage, many lenders collect property tax monthly as part of your blended payment and remit it to the municipality on your behalf. Confirm this arrangement with your lender — it affects your monthly payment calculation. If you pay directly, most municipalities offer monthly, quarterly, or annual schedules. Pre-authorized payment plans help with budgeting and sometimes earn small discounts.
On closing day, your lawyer calculates a property tax adjustment. If the seller has prepaid property tax covering months after your closing date, you reimburse them for their prepayment on a per-diem basis. Conversely, if taxes are in arrears at closing, the seller pays you. This adjustment appears on your statement of adjustments — ask your lawyer to explain it before you sign.
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Read All ReviewsThese guides are written for Canadian buyers, sellers, renters, and landlords and are kept current for 2026. They are for informational purposes only — not legal, tax, or financial advice. Rules vary by province; confirm details with your lawyer, accountant, or licensed real estate professional before making decisions.