Now that my wife and I have purchased our first home, we are learning all sorts of things about the additional expenses that come with owning a home. When you rent a property, you don't have to worry about things like title insurance or property taxes. Property tax laws are very different in each province, so your experience may vary. Here is what we've learned about our property tax costs, including challenging your property assessment and therefore reducing property taxes.
Challenging Your Property Assessment
While we were looking for a home, one of the bits of information that stuck out to me was the properties assessed value. The assessed value was an estimated value that is placed on the home by the BC Government. This value, at times, lined up very close to the price that the seller is putting on the home. At other times, however, the value was vastly different from what the seller had listed the home at. Sometimes more, sometimes less. Speaking with our real estate agent, he mentioned that the property assessment has less to do with the homes value – what someone is willing to pay for it, and more to do with the value as it is viewed by the government. The property assessment is made up of two parts. The land value, and the “improvement value”. The improvement value is the value of the home that is sitting on the property – ie, the house. The bigger the parcel of land you purchase, the more desirable that location, the more your land is going to be valued. The larger the home you build on that property, the higher the “improvement value” will be.
Reducing Property Taxes
Property tax is a required payment to our local government for the privilege of owning a home in their region. With that income, the region then provides public services like road repair, etc. The amount of property tax you pay depends on your region. Here in BC, it is dependent on the market value of the property you own. Commercial property downtown, for example, pays more than some rural property. They base your property taxes on your property assessment. The higher the value of your property, the more in taxes you pay. Here is Victoria, for example, it is common to have a property tax of ~ $1800-2500 per year. Ours is right around the middle of that. We've arranged a deal with our bank to pay our property taxes to the bank; who will pay the government a lump sum in July (when the property taxes are due), so we're making monthly payments and don't have to pay a large amount all at once.
However, we get to pay less property taxes for two reasons. First, we qualify for a home owner grant (as this is our first home, and we live in it). This is something that we need to apply for every year, but it will reduce our annual property taxes by about $500. Second, we are going to be able to reduce our property tax by challenging our property assessment. Thanks to a wonderful website, I determined that our home was being overvalued. I compared its assessed value against similar homes in the area, and all of those homes (despite having larger lots and larger homes) were assessed at a lesser value. I also was able to compare it to properties on our same street, and again I was able to conclude that our home was valued at a higher rate than the homes around us. I submitted a complaint, and thanks to reason, our homes value is being reassessed at a lesser value. As we are not planning on selling our home, this does no harm to us, and instead, we will be seeing a change in our property taxes over the next few years.
Is your home being over valued? How are you able to reduce your property tax costs?