Many people from across New Brunswick have been using Propertize.ca recently to compare their property tax assessments.
A common question that keeps coming up is around the levy (which is the amount that the property will pay in tax for 2013).
The answer is fairly complicated, so I will try to walk through a few reasons why it will vary on listings.
The 3% Cap is over
First, you have to understand that the last two years saw a cap of 3% on assessment increases (2011 and 2012). That program is now over.
To avoid your assessment immediately increasing to account for the difference (over the cap) in 2013, the government decided you will never pay tax on that difference (so long as the property remains your primary residence and you do not sell it). They call this the Assessment Gap (described by SNB below):
Assessment Gap (Permanent Assessment Exemption)
This new “Assessment Gap” serves as a permanent exemption from taxation and represents the difference between the 2012 market value and the 2012 capped value.
If you benefited from the 3% cap in 2011 and 2012 you will be able to keep this savings until your home is sold or ceases to be your principle residence.
Real Property Assessment
This is supposed to be the actual value of your property (what you would expect to list it for if selling) as of January 1st, 2013.
In an simple system, we would simply multiply this by your tax rate (add a few fees) and that would be your levy.
That isn’t the case, to avoid large increases (as the real property assessment for many people have jump by a huge margin), the government decided to create “spike protection” so that the assessed amount that you pay tax on can only increase 10% each year (described by SNB below):
Assessment Spike Protection
This new mechanism protects homeowners from unexpected assessment spikes.
Any increase greater than 10% will be phased in over time, making assessment growth much more stable and predictable.
New construction and/or major improvements are excluded from this protection.
The challenge that many people are seeing, including my parents, is that the “spike protection” seems to have a lot of wiggle room. Expect to hear more on this over the next few weeks.
So Why Does Levy Not Make Sense?
When comparing properties, you simply can’t tell what may be going on with their levy unless you see the actual tax bill:
- Did they benefit from the 3% caps to earn a large Assessment Gap deduction?
- Did they qualify for the Assessment Spike Protection?
- Is the property not their primary residence? They would pay an additional 1.8x tax in this case.
- Is their municipal tax rate different?
- What are they actually assessed at for tax purposes (Net Amount for Taxation) on the bill?
Basically, what I am trying to get at is comparing levys doesn’t make any sense as there are too many variables that influence it.
You best best is to determine nearby comparables, look at recent sales, and try to determine if your “Real Property Assessment” is inline with those. If not, you may have a case to appeal.
Where can you do this comparison easily? Try http://propertize.ca!