Property Tax

1. Property Tax PF-L3 Objectives:Perform Calculations relating to Property Tax Learning Outcome B-1

2. In Canada, there are three main levels of government: • municipal governments (councils) • provincial governments • federal government • All three levels of government provide services for the people under their jurisdiction. To do this, they must have revenue: money to pay the people in government for the services they provide. Theory – Levels of Government

3. You are aware of revenue that federal and provincial governments obtain in the form of Income Tax. These two levels of government also collect revenue through sales taxes (which will be dealt with at a later time). The main source of revenue from taxes for municipal governments is property taxes. Municipalities are obliged to build and maintain roads, bridges, utilities, and to provide police and fire protection as well as social and welfare services. Although some money is received in the form of grants from the Federal and Provincial Governments, the rest must come from the local taxpayers. Theory – Property Taxes

4. Municipal governments prepare a budget each year outlining their expected revenues and expenditures. The general property tax is the major source of revenue for municipal governments. In order to determine each person's or business' share of taxes to be paid, the total amount of tax revenue that must be raised is divided among all the property owners in accordance with the value of the property each person owns. Theory – Municipal Property Tax

5. The general formula for the rate of property tax • The property tax rate can be expressed in • Cents per dollar • Percent rate • Mills • Important Conversion • 1000 mills = 1 dollar Theory – Rate of Property Tax Formula

6. Test Yourself

7. Test Yourself

8. In Manitoba and other parts of Canada, the most common method of expressing property taxes is mills per dollar of assessed value. A mill is a term which has been adopted to make the tax rate easy to use. There are 1000 mills in a dollar; therefore, if the tax rate was 0.06, the mill rate would be 1000 x 0.06 = 60 mills You could use a shortcut method of finding the mill rate. Using the previous example you would have Once you have calculated the rate of property tax and if you know a property's assessed value, you can find the amount of the property tax. Theory – Mill Rates

9. Test Yourself

10. Unfortunately the basic mill rate is not the only tax levy the municipal taxpayer will be assessed. Other possibilities are: • School or Education levy • Hospital levy • Library levy • Local Improvement levies Theory – Other Municipal Taxes

11. When permanent facilities such as sidewalks, paved roads, street lights, sewers, and watermains are built, these facilities are usually paid for by the property owner benefiting directly from them. These facilities are called Local Improvements. Their cost is charged against the land fronting on the improved area, and can be levied as a dollar amount per metre of frontage or as a separate mill rate levy. Usually the taxpayer has the option of paying for local improvements in one lump sum or installments over a period of years. If you choose installments, you will be assessed interest. Theory – Local Improvement Levies

12. Theory – Personal Exemptions

13. Tax notices themselves will vary in style from municipality to municipality, however, the information supplied on the notices is the same. Study the tax notice shown. It is a representative example, so if you understand the figures in this form, you should be able transfer that knowledge to interpret any other taxation notice form. Theory – Spreadsheets

14. The property description section simply describes where the property is situated, the dimensions of the front of the lot, and the type of dwellings on the property. An apartment block, for example, may have 10 dwelling units, whereas the normal property will have one. Theory – Property Description Section of Tax Notice

15. The second part of the property description section details information about the assessment itself. Land and buildings are assessed separately, and the sum of the two results are in the Total Assessment. The portion percentage indicates the amount of the total assessment used for tax calculations. This figure will be reflected in the Total Portion Assessment (Total Port Assessment = Total Assessment x Portion Percentage). An added feature for this tax notice, the assessment subject to local levy, is indicated and, unless otherwise stated, will be the same as the Total Portion Assessment. Note: the assessment subject to local levy amount is used to calculate the Municipal Taxes. Theory – Property Description Section of Tax Notice

16. In this area of the notice, the calculations begin to show the actual taxes to be paid. The General Municipal are the basic taxes to be paid. Any hospital, library, or local improvement taxes will be indicated along with their By-Law numbers that have legislated the tax levy. Municipal Taxes are calculated using the Assessment Subject to Local Levy:Levy = Frontage Levy + (Assessment Subject to Local Levy x Mill Rate/1000)For example, to calculate the levy for Water Treatment:90.6 + (24000 x 0.068/1000) = 92.23 Theory – Municipal Taxes Section of Tax Notice

17. Educational Taxes - The notice also shows the education taxes that are levied. Provincial Tax Credit - Any provincial tax credits that may apply are also shown here. These, of course, will reduce the taxes to be paid. Theory – Educational Taxes and Provincial Tax Credit

18. This offers a summary of all taxes levied and credits to be applied. When all calculations are complete, the Total Taxes Due will indicate what is owing for this property. Theory – Total Taxes Due

19. Here is an example of a completed notice form. Confirm all the calculated (underlined) values. Use PF-L3 Handout. Theory – Test Yourself