Vacant Home Tax in Ontario: What You Need to Know

Soaring housing costs have become a pressing issue in many municipalities in Ontario. Policymakers have turned to vacant home taxes as a potential solution, imposing a financial penalty on unoccupied properties to incentivize owners to sell or rent out their homes. This would increase the housing supply and, in theory, lower prices. However, the effectiveness of this policy remains a subject of debate. If you’re a homeowner potentially subject to vacant home tax in Ontario, here’s what you need to know.

What is Vacant Home Tax?

Vacant home tax is a fee imposed on owners whose homes are unoccupied for a significant portion of the year. It encourages property use and increases housing supply.

Here’s how vacant home tax functions:

1. Property owners must declare their property’s occupancy stats annually.
2. The property becomes taxed if it remains vacant for at least six months.
3. An assessor calculates the tax amount according to a percentage of the property’s value.

Ultimately, the vacant home tax aims to discourage property owners from leaving their homes empty, increase housing availability for renters and buyers, and potentially lower housing costs.

You can protect your vacant property from environmental risks with vacant home insurance. However, as vacant homes are more exposed to these risks, your policy will cost more than regular home insurance.

How Vacant Home Tax is Calculated in Ontario

Typically, the municipality where the property is located is responsible for calculating the vacant home tax. Here’s a breakdown of responsibilities for calculating vacant home tax: 

1. A municipal assessor facilitates a property or current value assessment (CVA). 
2. The assessor then determines the property’s occupancy status, typically based on the owner’s self-declaration. However, the assessor can also conduct an independent inspection.
3. If the assessor deems the property vacant for more than six months, they apply a vacant tax rate to the CVA.

Note that specific tax rates and rules vary across municipalities.

Example of a Vacant Home Tax Calculation

Suppose a property has a CVA of $1,000,000 and a vacancy home tax rate of 1%. The vacant home tax would amount to $10,000. 

Exemptions from Toronto Vacancy Tax

Under specific circumstances, you may be exempt from the Toronto vacancy tax. Here are a few instances in which you can apply for an exemption: 

• The property is your primary residence.
• You rent the property out for a significant portion of the year.
• Your property is undergoing substantial renovation or remodeling.
• You inherited the property within a specific period.
• The owner falls ill or passes away.

If you qualify for the categories listed above, here are the documents you’ll need to provide the municipality: 

• Proof of residence for primary residence exemption
• Rental agreements for rental property exemption
• Building permits or contractor agreements for renovation exemption
• Death certificates or medical documentation for illness or death exemption

What Happens if You Don’t Pay Toronto Vacant Home Tax?

If you don’t pay the Toronto vacant home tax, you can expect the following consequences:

• Starting on the first day of default, you will receive a 1.25% interest rate on top of the unpaid amount.
• The unpaid amount will be added to your property tax bill, which you must submit in the same manner as regular property taxes.
• You may receive additional penalties for non-payment from the City of Toronto.
• It may become difficult to sell your property. 

Disputing a Vacant Home Tax Penalty

If you believe your property was misjudged, you can dispute the claim by following these steps: 

1. Carefully review the notice and understand why the property is considered vacant.
2. Collect any documentation that supports your claim that the property is not vacant. This might include rental agreements, proof of occupancy, renovation permits, or other relevant documents.
3. Contact the City of Toronto’s Property Assessment Office and file a dispute according to their instructions. This written dispute should include your reasons for challenging the assessment and copies of the supporting documentation.
4. If your dispute is unsuccessful, you can apply for an appeal with the assessment review board or tribunal.

Depending on your municipality, you may be subject to a limited dispute filing timeframe. For instance, you typically have 30 to 60 days from receiving your tax notice to file a dispute. It’s best to contact the City of Toronto directly for the exact deadlines and procedures applicable to your situation.

Vacant Property Taxes and the Economic Crisis

The relationship between vacant property taxes and economic crises is complex, with potential benefits and drawbacks. While some believe vacant home taxes may worsen the housing crisis, others are keen on how it could increase housing supply and drive down prices. Other potential benefits of vacant property taxes include the following: 

• Additional revenue for struggling municipalities, especially during economic downturns
• Increased housing supply and lowered costs by incentivizing property owners to occupy or sell their homes
• Fairness and equity within the community

Still, while vacant home taxes have raised significant funds for affordable housing programs, housing prices remain high in dozens of municipalities, and the tax may not be enough to level the market.

However, vacant home taxes do have their potential drawbacks: 

• Property owners discouraged from investing in their existing properties or purchasing new ones
• Increased rental costs due to property owners passing down the fees to tenants
• Administrative burdens that may be time-consuming for municipalities 

Key Advice from MyChoice

• As a homeowner, you should familiarize yourself with your municipality’s vacant home tax rules to avoid being fined. Also, always accurately report your property’s occupancy status and review your insurance coverage to determine whether your property might fall under vacant home tax. 
• If eligible, apply for exemptions to avoid paying the tax. Ensure you always provide the appropriate documentation—no detail is too much detail. 
• If you want more information about your municipality’s vacant tax rules, contact the municipal assessor’s office, municipal tax department, or local government website. You can also access municipal tools and services through the Ontario Ministry of Finance.