There has been a freeze on property tax assessments for the past few years on PEI which is about to change. Not only that, but they seem to have confused everyone on exactly what they are doing… I’m going to try and explain it in simple terms.
The property tax rate is determined by the province for their share and the community your home is located in also submits their amount based upon their budget requirements. Under the changes introduced recently, property tax increases would be tied to the province’s consumer price index to a maximum of 5%.
It is to my knowledge that when a property sells, the assessment for property taxes will NOT be based on the selling price (thus causing huge increases for buyers). It will be based on the market value as noted on your Notice of Assessment. You’ll notice there is a market value and your current frozen residential number on your current assessment.
I know it can be confusing….
PEI Property Tax Example
For instance a house is currently frozen at an assessed value of 90, 000 whereas the market value is 94,500 (according to government) and similar properties in the neighborhood are selling for 130,000 (selling price). You will now have the CPI used to adjust the current frozen rate.
If you sell your house the new buyer will now have to use the Market Value for taxes which the CPI will be used to adjust yearly.
| Frozen Rate (Used If You Stay) | $90,000 |
| Market Value (Used If House Sells) | $94,500 |
| Selling Price * Not Used | $130,000 |
The market value is based on an adjustment multiplier determined by market activity in the area. It is almost always lower than what the house would sell for. This number also adjusts yearly based on the multiplier.
The PEI Property Tax Reactions
Critics argued the changes will raise taxes for every homeowner at a time of recession.
“This was a bit of a blind-side,” said agent Joel Ives.
“No one in our industry, as far as we can tell in our real estate association, was made aware of these changes that are coming and we’re not quite sure how we are to consult with people who are thinking of buying property at this point.”
Joel has a well written post on the PEI property tax issue.
Provincial Treasurer Wes Sheridan said the difference between market value and assessed value is only about four per cent in most cases.
“Sometimes it will be higher, sometimes less, but this means Islanders are not going to see the huge seven or eight per cent increases they’ve seen in the past,” he said.
The selling price of a house is only one of several factors used to calculate market value, Sheridan said.
Property Tax PEI Conversations
PEI Tax Info
Official sites that will eventually lay out all the taxes:
And while I can understand how a property tax freeze could not sustain itself forever…it brings back a classic song about taxes. Courtesy of The Beatles - Tax Man
What are your thoughts on the latest tax increase? Did you find it confusing?
