Don’t cancel vacation plans because of property-tax bills – reduce or defer payments instead
Fiona Anderson
Sun
Property taxes seem to come at the worst possible time — when the summer is just starting to heat up, and the world looks bright and sunny. Plans are being made for family vacations, camping trips, summer camp for the kids or maybe renting a cabin for a week.
And then the property-tax bill shows up and, despite the fact it comes every year, it still seems to come as a surprise, causing people to scramble to figure out where the money to pay the bill is going to come from.
But before your write the cheque or stick your head in the sand and just ignore the deadline, triggering penalties, think about two things: reducing and deferring.
The first step in this two-pronged approach is to make sure you are paying the lowest tax you can. Unlike income tax, there isn’t much leeway in property taxes, which are determined by the value of your property and the mill or tax rate of the municipality you live in.
If you think your property isn’t worth the value the government assessed it at, the deadline for complaining about that was last January so there is nothing you can do about that now.
But you can try to shrink the tax bill by making sure you apply for all the grants you can.
Almost everyone in British Columbia is entitled to a $570 homeowner grant provided they live in the house they own, and are a Canadian citizen or landed immigrant.
The grant, however, can’t reduce property tax to less than $350, and owners of houses worth $1,050,000 or more are only eligible for a reduced grant, which gets smaller as the house value increases.
A further $275 may be trimmed for seniors over 65, disabled taxpayers and veterans, provided the homeowner pays at least $100 in property tax.
If, after you’ve applied for the grants (the application is part of the notice and can also be done online for some municipalities) the tax bill is still too much to handle, then consider putting off paying the taxes, an option that is allowed for some homeowners.
This year there are three types of homeowners who can defer their taxes: those 55 or older or on disability, those suffering from financial hardship and families supporting children under 18.
In the first program, the homeowner must have at least 25 per cent equity in their home and there are some fees to apply. For the other two programs, only 15 per cent equity is needed, and there is no fee.
In all cases, the taxes owing, along with interest, don’t need to be paid until the house changes hands, either through a sale or death, although a taxpayer can choose to pay back the money sooner.
And the interest rates are low, based on the prime rate charged by Canada’s major financial institutions. That means the current rate, which is set every six months, is 0.25 per cent for the seniors’ deferment (prime minus two percentage points) and 2.25 per cent (prime) for the other two programs.
B.C. Finance Minister Colin Hansen said when the government was reviewing the financial hardship provision, which is only in place for 2009 and 2010, it realized that families with children were the ones that needed the help.
“As families go through the years of raising children, sometimes they might get a rough year, and this is one program that can really help bridge through a difficult time,” Hansen said in an interview.
For example, if one of the parents loses their job, or gets their hours cut back, even if they have equity in their home, a bank may not let them borrow money because they don’t meet the income requirements, he said.
“So this [gives] them an option to help cover expenses in a way that doesn’t put immediate pressure on repayment,” Hansen said.
Michael Thorne, a certified financial planner with Thorne Financial Planning, sees little reason not to defer taxes in many cases.
“Many people have a lot of equity in their homes these days and it’s not doing them a lot of good,” Thorne said.
So deferring taxes is one way to take money out of the home, he said.
“It’s a very small way, but it’s a relatively easy way,” Thorne said.
And that money can be used to buy things like long-term care insurance, or estate insurance, that may pay out quite a bit down the road, he said.
For information about the province’s property tax deferment programs and for application forms go to www.sbr.gov.bc.ca/individuals/Property_Taxes/Property_Tax_Deferment/ ptd. htm.
For information on the home owner grant go to www.sbr.gov.bc.ca/individuals/Property_Taxes/Home_Owner_Grant/hog. htm
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