Property Tax on Rental Properties in Ontario: Rates and Who Pays

If you own a rental in Ontario, property tax is usually one of your largest yearly costs. You may be wondering what rate applies to a rental building, why an apartment building can be taxed differently from a house, and whether you can simply pass the cost on to your tenants.

This article explains the general picture in plain language. Property tax rates are set locally and change from year to year, so it does not give you a single rate. It shows you where the numbers come from, how tenants fit in, and what to confirm before you rely on any figure.

How municipal property tax applies to a rental

How property tax applies to your rental depends on where the property sits, so it is worth confirming the details with your municipality. The rate is not the same everywhere: it depends on your municipality, the year, and the class the property falls into.

Your building's classification and the tax ratios that apply to it can affect what you pay, and your municipality can confirm the details. Because those ratios differ by municipality and by year, the only reliable source for your rate is your own tax bill or your municipality's published rates for the current year.

If you are not sure which class your property is in, your tax bill will usually show it, and your municipality can confirm it.

Who pays the property tax: landlord or tenant?

Whether and how a tax cost can be reflected in the rent depends on your situation, so it is worth confirming with a lawyer.

Rent increase questions turn on the details of each tenancy. How the rules apply to your units depends on your situation, so it is worth getting advice before you raise rent to cover a tax increase.

Some accommodation sits outside the usual rules. For example, many rent rules do not apply to non-profit and public housing or to university and college residences, although rules such as maintenance and eviction reasons still apply. Whether the Act applies at all can itself be an issue, and an application about whether the Act applies has its own form and fee.

When property taxes go down, tenants have rights too

The tax rules cut both ways. Under the Residential Tenancies Act, a landlord must reduce rent when municipal property taxes drop by more than a prescribed percentage, and a tenant can apply to the Landlord and Tenant Board for a rent reduction if municipal taxes or charges on the rental property go down.

The Landlord and Tenant Board is part of Tribunals Ontario and is where landlords and tenants resolve disputes under the Residential Tenancies Act. It can resolve a dispute through mediation or through a hearing where a member issues an order. The exact percentage and the other conditions that trigger a reduction should be confirmed against the current Act before you act on them.

If you are a landlord, this means you should keep track of your assessment and tax changes, not only increases. A drop in municipal taxes can create a duty to adjust rent.

Where the answers come from

The Residential Tenancies Act covers rental housing such as apartments, houses, rooms in rooming or boarding houses, retirement homes, and mobile home park or land lease sites, but some arrangements are exempt, including long-term care home residents and short-term respite care in a care home. There is no separate Landlord and Tenant Board Act, because the Board applies the Residential Tenancies Act.

What to do next

• Pull your most recent property tax bill and note the property class and the tax rate shown.
• Check your municipality's website for the current year's rates, especially if you own a building that may be multi-residential.
• Review your tenancy agreements to see what they say about rent and any other charges.
• Before raising rent because of a tax increase, get advice on the rent increase rules that apply to each unit.
• Watch for tax decreases, since a drop in municipal taxes can give tenants a right to a rent reduction.
• If the tax treatment is large or unusual, ask an accountant about how it affects your rental income reporting.

A lawyer can confirm how the rent rules apply to your units, and an accountant can help with the income tax side of rental expenses.

Frequently asked questions