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MPAC and Property Taxes
What is MPAC, how does it assess the value of your home, and how do those assessments affect your property taxes?
What is MPAC?
MPAC stands for Municipal Property Assessment Corporation. MPAC is a not-for-profit corporation that was created by the government in 1997 to standardize property assessment across the province.
MPAC evaluates all properties in Ontario (more than five million of them!) every four years to give municipalities a base value for each property, on which they can calculate their property tax rates. (MPAC does not set taxes itself. It only assesses the value of properties and gives the information to municipalities.)
How does MPAC assess property value?
For most homes, MPAC uses a process called direct value comparison. This is based on looking at the sale prices of comparable homes in your neighbourhood that were sold close to the assessment date.
MPAC looks at more than 200 factors to decide which homes are ‘comparable’, but there are five main factors that account for 85% of your assessed value: location, lot dimensions, living space, age of the property, and quality of construction.
The lot dimensions are calculated using the formula frontage × depth. (Why not width × depth? The frontage has more impact on the municipal budget, because more frontage means more street, sidewalk, and curb to maintain).
Other factors include additions, finished basements, the number of bathrooms, swimming pools, decks, and garages.
How do assessments affect property taxes?
Municipalities establish a budget for each year to pay for the services they provide. Unlike the federal and provincial governments, they can not borrow, so they must have a balanced budget each year.
The dollar value of that budget is divided by the dollar value of all the properties in the municipality to determine the tax rate (called the mill rate).
Tjat tax rate is then multiplied by each home’s assessed value to determine how much the homeowner must pay in property taxes.
If your assessment goes up, the increase is phased in over four years. If your assessment goes down, you pay less immediately.
What makes my taxes go up or down?
If the city’s budget goes up (as it does most years due to inflation), then all things being equal, your property taxes would go up by the same ratio.
If your home’s assessment goes up more than your neighbour’s, for example because you added a garage, then your taxes would increase more than theirs.
If your home’s assessment goes up less than most other homes, your taxes would increase less, or might even stay the same or decrease.
Remember that your assessment is also affected by which features of homes are considered valuable on the market right now. If having a pool becomes more popular, people will be willing to pay more for pools. Houses with pools will sell for higher prices, so the assessments for all houses with pools will go up (even the ones that didn’t sell), and so will their taxes.
In summary, you pay a share of your city’s property taxes that’s based on what MPAC calculates your home could sell for on the market today.
Want to know more about assessments and property taxes? Just ask me, I'll be happy to help.