Ottawa Ontario Taxes To Be Aware Of
Ottawa Ontario taxes to be aware of if you’re a resident of Ottawa you probably already know that saying the city’s taxes are high is an understatement. For individuals and businesses alike, the amount of taxes paid to the local government can be obscenely high. Nevertheless, there are several reasons why paying taxes is important here – it allows us to support local infrastructure and services, such as public transportation and recreational programs. We may not enjoy the process of forking over our hard-earned money each month, but at least we can take comfort in knowing it’s supporting our community in ways we depend on every day.
Anyone living in Ottawa or owning a business in Ottawa needs to be aware of the city’s taxes. Whether you’re managing a family household or running a business venture in the nation’s capital, it pays to be informed about what kind of taxes apply to you and your assets. What’s not always so easy is figuring out what those taxes are, what they pay for, and how much they cost. If you’re moving to Ottawa, we’ve got the rundown on real estate taxes.
Property Tax and MPAC
Property tax can have a notable impact on expenses, as it is based on location and value, this tax is an annual fee you pay for owning any type of property, with the money paying for essential services. In Ottawa, property tax is divided into provincial and municipal taxes.
Ontario’s provincial taxes pay for education and are the same across the province. Living in Ottawa, your municipal taxes are determined by the city. Municipal taxes pay for services including stormwater management, solid waste collection and management, emergency services, public transit, and other vital city services.
The Municipal Property Assessment Corporation evaluates your property every four years and taxes are based on three factors: the assessed value of your home and the municipal and education (provincial) tax rates.
It’s important to note that your assessed property value is not always the same as the fair market value of your home. During the pandemic, houses were selling at well above assessed value.
MPAC is responsible for evaluating every property in Ontario: residential, commercial, industrial, and more. They share general guidelines for how they determine the value of residential and other properties. They do not share the precise factors that go into determining the value of a specific home or property.
There are calculators available online to help you determine your property taxes based on your home’s assessed value and your municipal and provincial tax rates.
HST and GST
If you’re moving to Ottawa from the United States, you can think of HST and GST as sales tax. In Europe, it’s called VAT or Value Added Tax. The GST, which stands for Goods and Services Tax, is a federal-level tax of 5% placed on nearly all goods and services in Canada.
A few provinces have only the GST, including Alberta, Northwest Territories, Nunavut, and Yukon. If you’re moving to Ottawa from one of these areas, your sales taxes will be higher.
Some provinces have a PST, or Provincial Sales Tax, that is added to the GST. This tax varies by province and is between 6% and almost 10%. In Ontario, we have an HST: a Harmonized Sales Tax that covers both federal and provincial sales tax.
The HST is designed to simplify the system by only collecting one tax. In Ontario, the HST is 13%, the lowest HST in the country. Ontario combined their 8% PST with the 5% GST in 2010.
When the HST was adopted it affected some real estate transactions. HST does not apply to the resale price of most existing homes and condos. But HST does apply to the purchase of new construction and commercial property, raising the rate from 5% to 13%.
To offset the provincial tax portion for new home construction, the government offers a tax credit program to builders. This alleviates the additional tax burden and allows builders to sell at a lower price point.
There are also federal tax rebate programs available for up to $6,000. The maximum Ontario provincial tax rebate is $24,000.
. Taxes being taxes, determining your eligibility and the amount of credit available is not always simple, that’s why It’s vital to talk with a knowledgeable realtor about any sales taxes you’ll pay on the property you intend to buy in Ottawa.
There is a lot of grey area in terms of real estate and real estate services and HST/GST. Legal fees, inspection costs, commissions, and moving costs are all subject to HST. Some properties, due to zoning, will have HST costs. A home that has been substantially renovated may be subject to HST.
If you purchase property that you intend to rent, the process of applying for HST rebate changes.
Though the HST was designed to simplify sales tax collection, it can be a little tricky when it comes to real estate. In most cases, buying a new or existing home in Ottawa will not involve significant sales tax paid by the buyer.
But don’t assume. Touch base with the seller, builder, real estate agent, and your lawyer to get a full understanding of how HST affects your purchase.
Ontario Land Transfer Tax
When you buy land in Ontario, that land is subject to the province’s Land Transfer Tax. For most of you moving to Ottawa, this will be a fairly straightforward tax based on the value of the purchased property.
First-time homebuyers in Ontario may be eligible for exemptions or refunds of all or part of the Land Transfer Tax depending on your specific situation as well as the particular property value.
All Canadian provinces except for Alberta and Saskatchewan have a Land Transfer Tax. There are plenty of online resources to help you figure out how much you will owe for this tax based on the property you purchase.
There are many land transfer tax calculators you can Google to find out your specific costs. It also serves as a reminder that Toronto has an additional municipal tax that effectively doubles the Land Transfer Tax. It is the only municipality in Ontario to impose this additional tax. If you’re moving to Ottawa it will not apply.
Some of these financial sites that offer tax calculators also provide excellent information on who is eligible for full or partial Land Transfer Tax refunds. It’s always best to do your due diligence.
Vacancy Tax OTTAWA
In order to address the housing supply shortage in Ottawa, the city instituted a Vacancy Tax in 2022. The tax aims to encourage owners to live in or rent their properties. Toronto has a similar tax.
This 1% tax, called the Vacant Unit Tax, applies to vacant residential housing. Undeveloped property is not affected, nor is a property in the midst of being developed.
A vacant residential unit is defined as one that is unoccupied for more than 184 days–or about six months ̶ in a calendar year. The goal is the reduction of homes left empty by speculators and an increase in affordable units on the sale or rental market.
Vacancy Insurance OTTAWA
Vacant Home Insurance is not a way to get around Vacancy Tax. Rather, it’s a type of insurance that protects homeowners who plan to be away from their residences for an extended period of time.
In Ontario and elsewhere in the country, a home can be considered vacant for insurance purposes if it is unoccupied for more than 30 days. It doesn’t matter if the insurance is paid or not.
The reason such rules exist is that a home with no occupants is subject to a higher risk of certain damages. When no one is home, a burst pipe or a bad wire can cause far more damage than if someone were available to address it promptly.
Depending on the insurance company you work with, there will be different definitions for vacant and unoccupied homes. Unoccupied homes are those the owner intends to return to as a residence.
The best example of an unoccupied home is one where the owners travel frequently or take an extended vacation.
Vacant homes are those that are not ready to live in or that the owners do not intend to return to. Examples include unoccupied rental units.
Insurance for an unoccupied home may be as simple as alerting your insurance company to an upcoming extended vacation. For vacant homes, the process is more complicated.
Vacancy Insurance doesn’t have the same amount of coverage as other home insurance. The possibility of vandalism and damage is higher, leading to less coverage and higher prices.
If you are building or remodeling a home in Ottawa, find out if your insurance company considers it unoccupied or vacant until you move in. You want the policy that best protects your investment even if you aren’t residing in it.
Builder’s Risk Insurance
If your move to Ottawa involves building a new home or a major remodel of an existing home, you may want to consider Builder’s Risk Insurance.
Builder’s Risk Insurance offers protection in certain circumstances while a home is under construction. Standard homeowners’ policies can have gaps, especially when major renovations are taking place.
Builder’s Risk Insurance mainly protects whoever is doing the work. That may be you but it’s more likely to be a contractor or company. These policies are purchased before work begins and covers unforeseeable damages. Weather, fire, vandalism, and theft are common areas of coverage.
Making sure your builder has adequate insurance can help avoid delays and cost overruns for your new or renovated home. These policies protect your contractor and they protect you as a homeowner.
Home Insurance
Home insurance in Ottawa is vitally important for anyone who owns a home. It provides coverage for your house and any property inside, as well as providing protection against liability for any accidents that occur on your property. Having proper home insurance also ensures that you will be able to collapse any financial burden resulting from unforeseen damage caused by perils such as fire or theft. With the rising cost of housing, it’s critical that homeowners have the appropriate level of protection in place, so they can have peace of mind if something goes wrong. Be sure to rely on a reputable insurance broker or agent. In fact, on your relocation, we work with only the best of the best when it comes to lawyers, home inspectors, financial and insurance contacts within our team of experts. Over the years we have honed on the best of the best service providers that provide the same high quality and high integrity service we offer you when finding your next home.
The taxes involved in buying a home can feel overwhelming. In most cases, however, you will find that they are fairly straightforward. The regulations are written to cover all types of properties and circumstances. Moving to Ottawa and buying a home for your family is the least complicated of these.
With your new home comes many exciting things, and taxes are an unfortunate part of the process. No one likes to think about them, but having a basic understanding of what you’re getting yourself into can help eliminate any surprises. That’s why we’re here to ensure you are well-informed, guided, and protected along the way when purchasing your next home. And speaking about relocating, if you are considering buying a home in Ottawa feel free to reach out to us. Give us a call – shoot us a text – send us an email – or even wrap it in a bow and send it first class because we got your back when moving to Ottawa or anywhere across Canada.
RECOMMENDED VIDEOS:
https://www.living-inottawa.ca/ottawas-best-neighbourhoods-for-young-professionals/
https://www.living-inottawa.ca/moving-to-ottawa-from-another-province/
