Condo Property Taxes Involved When Buying A New Condo
Condominiums are becoming popular day by day in Toronto. People are putting a lot of time and money in condos, and they hold a great value too. However, money is a crucial factor, and it significantly affects where and how you are investing it.
Since the prices of condos are predictable to rise at a steady but slower rate in comparison to single-family homes, a lot of investors are taking advantage of this. Condos will undoubtedly provide you an elegant and better lifestyle, but make sure you know all about the costs and taxes before you purchase your unit.
In this article, you will get to know about the various things that must keep in mind to handle the property taxes that are related to condos. You will also get answers to some of the most common questions that most condo buyers have.
So, make sure that you are clear about the property tax that you will have to pay for your condominium and also for the common areas in the condo community where you live.
What should you expect?
When you go to purchase a condo, make sure that you think of the future as well. Don’t easily get into the sales and end up getting your unit without any planning. You should be aware of all the details related to the purchase and how it will be governed. Go through all the necessary documents thoroughly and make sure that you are clear about every point.
There are a lot of living expenses that are inclusive in the condo fees. Costs such as maintenance, landscaping, emergencies, and repair work in the building are mostly inclusive in the condo fees. However, the property tax is something that is not inclusive. Therefore, you will have to pay property tax.
The property tax varies a lot, depending on the location and other factors. It can change all over the Greater Toronto Area. Let’s find out about the calculation.
How is the property tax for condos calculated?
As the prices of the homes increase, the cost of property tax decreases. In fact, in Toronto, the rates are comparatively less. The tax in areas such as Orangeville and Oshawa is pretty high as the region falls under developing communities. But how to calculate tax? Mostly, it is calculated by multiplying the assessed value of a particular property by the given tax rate. This tax rate varies from land to land, depending on the usage.
The rates also vary on the basis of residential use and other purposes that the property is in use for. In fact, even this rate varies from cities and provinces, and there can be significant differences in regional taxes. So, make sure that you have an idea about the taxes in your region and the territory that you are choosing.
Generally, the rates for condo communities range from 1.5 percent to 2.5 percent of the property value after appraisal. There are reassessments as well after a few years to find out the changes in property value.
The Housing Unit
The local taxing authority of the region assesses the property taxes that will be implied on the condo by each housing unit. Therefore, the owner has to pay taxes on the basis of the percent of the assessed value of the unit. In this, the size of the unit, along with the condition of the building, is also into consideration. Moreover, the taxes are also decided on the basis of the comparative selling price of other condo communities.
The Common Areas
One of the most significant advantages of owning a condominium is that you won’t have to pay taxes for the common areas separately. The value of your individual unit covers all the taxes that might be applicable to the common areas. However, there are a few jurisdictions that assess taxes for common areas as well. In such cases, the condo association will be responsible for paying the taxes for these shared spaces. This will be in consideration of the maintenance or any other fee that residents have to pay to the association.
What about cooperative housing?
Condominiums are not similar to cooperative housing exactly, but there is a misconception most often than not. Cooperative housing follows a different structure when it comes to ownership and property taxes.
In co-op housing, you basically have shares in the corporation which own the building or the entire development. However, the local taxing authority assesses the taxes for the whole property, including the common areas. The corporation is then responsible for collecting taxes for the shareholders, and this is usually taken as a maintenance fee. These taxes are deductible as itemized deductions from your income tax.
The property tax major depends on the square footage and the property. So, the property tax for condos is relatively less, and for the common areas, the tax is shared, which is another advantage. Especially for cities such as Toronto, the taxes are not as high as you would expect. However, the other charges in Toronto certainly cover up for this.
Also, the city has a lot of people who are working professionals and taking the condos on rent. The tax is calculated for these in a different way, and the non-residency terms are considered. In fact, if you are looking to rent out the condo unit, the income will be taxed under personal income.
There is also an exemption for the residents of the country to not pay gains on the increment of the property value. However, this principle residence exemption won’t be applicable if you are not the one residing in the property.
There are a lot of things to keep in mind before making an investment in condos. Yes, they are becoming significantly popular, but make sure that you are making the right decision and at the right time. Find out more details about the property tax of your particular area and find out how it is going to impact you financially.
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