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First Time Homebuyers: What You Really Need to Know – Pt. 1
When it comes to buying your first home in Calgary, there is a lot for the inexperienced homebuyer to learn about. From what to watch out for before you buy to understanding the on-going responsibilities, obligations, and perks of home ownership – there's a lot for first time buyers to know!
One of the most important things that any home owner – first time or not – should understand is residential property taxes. Common questions include: How are Calgary property taxes even determined? Why do they differ, sometimes dramatically, from year-to-year? And just where does your property tax money even go?
All good questions! Read on for some of the most straight-up answers you can get from folks who really know what they’re talking about.
First Time Home Owners and the Property Tax Puzzle:
The prospect of first time home ownership is both exciting and, at the same time, daunting.
Having a place to call your very own is a point of pride for almost everyone who took the plunge and invested in a home (and as well it should be!)
On the other hand, the process of buying a property and the associated responsibilities and obligations of home ownership can be a confusing maze to navigate. From qualifying for a mortgage and finding your perfect property to arranging utility connections and understanding residential property taxes, first time homebuyers often have a steep learning curve ahead of them.
But, as with any tricky maze, a good map can make all the difference in the world!
It’s with this in mind that the awesome agents here at Elite Home Real Estate have decided to make a blog series dedicated to help guide first time homebuyers through the twists and turns of purchasing their very first property.
In this first installment, we’re going to delve into something that home owners – first time or not – often wonder about: Residential property taxes.
Residential Property Taxes in Calgary, Explained (in Easy Language!)
We know property taxes in Calgary can be pretty confusing, especially for first time homebuyers. This confusion is furthered by news stories about this year’s residential property tax increases (and decreases).
After all, why is it that the taxes for Calgary’s single-family detached residential properties have gone up while condos and business property taxes have gone down? What kind of mathematical genius is behind these seemingly arbitrary fluctuations? And where do the property taxes we pay even go?
• How are Calgary’s property taxes determined?
According to the City of Calgary’s website,
“Each year City Council approves the budget needed to support City services. To get the amount of revenues required from property taxes, The City takes the overall expenditure and subtracts all other sources of revenue such as business taxes, licence fees, user fees and provincial grants. The balance is the amount to be raised through municipal property taxes.” (Click here for the full scoop)
In other words, Calgary’s City Council figures out how much they need to spend, how much of that they can get from all other revenue sources, and then whatever is left over is paid for with property taxes.
In order to figure out how much property tax to charge Calgarians for any given budget year, City Council establishes a tax rate.
• So what is this “tax rate”, exactly?
The “tax rate” is the amount of tax to be paid on every dollar of a property’s assessed value.
This year, home-owning Calgarians paid $0.00635 per every dollar of their home’s appraised value. Of this .00635¢, .0039¢ was the municipal tax rate and .0024¢ was for the current provincial tax rate.
So, if your home has been assessed at $560,000 then your property tax bill for 2018 would be just over $3,560 ($3,560.12, to be precise).
• A brief word on provincial tax rates…
Unlike the city’s (or “municipal”) tax rate, the provincial tax rate is determined once Calgary City Council finds out how much money is required from Calgarians by the Government of Alberta and Calgary Catholic School District (the technical term for this amount is “annual requisitions”).
However, something that not a lot of Calgarians know is that the provincial portion of our property taxes specifically goes to funding our public and separate school education systems... Which, when you think about it, is not such a terrible thing to pay into!
• Why do property tax rates sometimes differ so much from the year before?
You might have heard that Calgary’s property tax rate jumped 2% this year, which is a notable increase for a lot of homeowners… Though not nearly as big as the 10.5% increase we saw in 2015, or the 4% decrease of last year. But why do these fluctuations even happen?
Well, it’s largely because of 2 big things:
1. Calgary is getting bigger, which means demands for and upon municipal infrastructure, services, and supports is also growing
2. Everything costs more than it used to
Please keep in mind that there are always other, more nuanced and complicated reasons for property tax hikes and decreases, but these are the top two most common and significant reasons for property tax fluctuations.
That said, other factors that impact our yearly property tax rates include:
• Increases in the amount of education tax the province requires
• Revenue reductions from lower grants or fees (cities rely on a number of different provincial and federal grants to help with annual operating costs)
• A change in property type tax allocations
• Changes in tax assistance programs for seniors and low-income households
• Changes in school support declarations
• Where do our property taxes actually go?
In a word, everywhere. From schools to police, transit to waste & recycling services – our property taxes support the city services that make our daily lives that much easier.
The largest chunk of our property tax dollars – 38.61% – this year went to provincial/education tax. The remaining 61% stayed within the city, funding such essential services as our police (13.7%), fire department (8.93%), roads (5.22%), parks (3.02%), recreation (1.87%), waste management (1.52%), planning & development (0.6%), and so much more (click here to see a full break-down of where our property tax dollars get spent).
Residential property taxes in Calgary can definitely be confusing, but they're way less intimidating once you have a solid understanding of the basics! If you have any questions about how property taxes might impact your next new home or if you're a potential first time homebuyer who wants to speak with some honest, friendly, and truly knowledgeable Calgary real estate experts, then feel free to get in touch with any of the good folks here at Elite Home Real Estate – we know our stuff and are always happy to help!