Property Tax Deferral and Relief for Seniors in Ontario

If you are on a fixed or low income, a rising property tax bill can put real pressure on staying in your home. Many people ask whether the tax can be put off, reduced or partly refunded.

This article explains in plain terms what those words usually mean, how to find out what your own municipality offers, and which federal tax rules around owning a home are worth knowing at the same time.

Deferral, cancellation and rebate: what the words mean

A deferral generally means you postpone paying some or all of the tax, usually with the amount staying owing until a later event such as a sale. A cancellation or reduction means part of the bill is removed. A rebate means money is given back after the tax is paid.

These are different tools, and a program may offer only one of them. Ask which one is being described, and whether any amount stays owing against your home.

Why the answer depends on your municipality

Property tax bills in Ontario come from your municipality, and the details of any relief program, including who qualifies, what income limits apply and how to apply, are generally set locally. The details can differ from one municipality to the next and can change from year to year.

The most reliable step is to contact your municipal tax office and ask what programs exist for seniors or low-income owners, what proof they require and what the deadline is. Ask for the program terms in writing.

• Ask whether the program is a deferral, a cancellation or a rebate.
• Ask whether interest or an amount owing is registered against your home.
• Ask what happens to the arrangement if you sell, move or add someone to title.
• Ask whether the program applies to the current year's bill or only future bills.

Tax rules that matter when you eventually sell

If you plan to stay for years and then sell or downsize, the federal principal residence exemption is a key rule. If the property was solely your principal residence for every year you owned it, you usually pay no tax on the gain.

If it was not your principal residence for every year, only part of the gain is exempt. The exempt part is the gain multiplied by designated years plus one, divided by years owned. When you sell, you report the sale and the designation on Schedule 3 and complete Form T2091(IND).

A principal residence can be a house, cottage, condominium, apartment, trailer, mobile home or houseboat. The land that counts is usually limited to half a hectare (1.24 acres), unless you show more is needed to use and enjoy the home.

Renting a room or moving out

Some owners on a tight budget consider renting part of the home. If you use part of the home to earn income, you split the selling price and adjusted cost base between the two uses on a reasonable basis, such as square metres or number of rooms. The CRA generally keeps full principal residence treatment where the income use is ancillary to the home's main use as a residence, there is no structural change and no CCA is claimed.

If you move out and rent the whole home, you are generally treated as having sold it at fair market value and bought it back at the same amount. You can elect not to be treated as having changed its use, and while that election is in effect you can designate the home as your principal residence for up to four years. Rental income is reported on Form T776.

What to do next

• Call your municipal tax office and ask about deferral, cancellation and rebate programs.
• Gather your latest tax bill, notice of assessment and proof of age and income.
• Ask in writing how any deferred amount is secured and repaid.
• Speak with a lawyer or accountant before renting part of your home, moving out or changing who is on title.

Frequently asked questions