Do you get confused by property taxes?

 

I know I sure used to. They are assessed in January, but you pay in July? So Strange.

 

Here is a breakdown of how it works.

 

When you own a property in B.C., property taxes must be paid yearly for each property. The money raised from the property taxes you pay is used to fund local programs and services, such as:

• Police and fire protection
• Emergency rescue services
• Road construction and maintenance
• Garbage services
• Recreation and community centres
• Parks
• Libraries
• Schools 
• Hospitals

When a community starts a new service they are responsible for the costs. In some cases, the cost for the new service may be shared with other nearby communities. A recreation facility is a good example of when the cost to provide a new service may be shared.

 

The amount you pay is based on the funds needed to provide services for the year. Tax rates are set to determine how to share the cost of providing the services.

 

Tax rates and your property assessment determine how much property tax you pay.

 

Many home owners will have their taxes paid automatically by their mortgage lender. Lenders will estimate your taxes owing and you’ll pay, along with your mortgage payment, into a side account from which the taxes are paid every year. Lenders do this because they want to be sure the taxes are paid – property tax debt takes priority before mortgages should the borrower default!

 

However, even if your lender pays the taxes, you’ll want to apply for the Home Owner Grant. The Home Owner Grant is a yearly grant from the provincial government to help offset your property taxes. If you qualify, that’s $570 off your property taxes! You’re eligible for the grant if :

• you are the owner (or spouse/relative of the deceased owner) of the property;
• you are a permanent resident of British Columbia
• you occupy the building on the tax notice as your principal residence
• you have not applied for or received a home owner grant on any other property in the Province during the calendar year; and
• no other person can have received a home owner grant on the property for the calendar year.

Most property owners in BC will qualify as long as it is their principal residence.

 

But how does it all work with the dates and such, because it is kind of confusing. Let's look....

 

The thing that confuses people the most is the timing of your taxes. Even though you pay your taxes on or about July 2 of every year, you’re paying for that whole calendar year (ie, January 1, 2015 to December 31, 2015, not July 2, 2015 to July 2, 2016). Where this can come up is when you sell your house. People sometimes assume that if they sell their home in the spring, they’ve already paid their property taxes. Not true, because they haven’t been levied yet. When you sell your home, no matter what time of year, your lawyer or notary will have to adjust for the taxes on the statement of adjustments at closing.

 

For example, If you sold your home and it closed on March 31, 2015, the adjustment would be negative (a debit) to compensate the buyer for the time you occupied the house in 2015 (90 days) – since they will be responsible for paying the property taxes in July. If you sold your home and it closed on August 1, 2015, you would have already paid the taxes, so the adjustment would be positive (a credit) with the buyer compensating you for the time the buyer enjoys the house in 2015 (152 days).

 

Hopefully that clears up any and all confusion on property taxes.

 

Until next time,

 

Darin