One of the less exciting aspects of homeownership is property tax. But while property taxes cause some grumbling among homeowners, it’s worth noting that they are the major source of income for municipalities, funding everything from water, garbage pickup and snow removal to police and fire services. Not a bad deal, when you think about it!

Read on for a property tax primer for first-time homebuyers. Here’s what you need to know up front.

How property tax is calculated

Property taxes are calculated by multiplying the assessed value of a property by the tax rate. This tax rate varies by land use (that is, residential versus other uses) and between provinces and cities.

There can be significant differences between regional tax rates – worth keeping in mind if you’re trying to decide what province or territory to settle down and buy your first home in.

The levels of government that collect property tax

Your total property tax bill consists of a municipal property tax and a provincial/territorial education tax.

Other taxes a homeowner pays

In addition to your annual property tax as a homeowner, homebuyers are subject to a one-time provincial land transfer tax (also known as a “property transfer tax”), which is calculated as a percentage of the property value.

Almost all provinces charge land transfer taxes. Some, including Alberta and Saskatchewan, and the territories, opt for lower land title transfer fees, land title fees or registration fees instead.

Unique among municipalities, the City of Toronto levies an additional land transfer tax on purchases made within its boundaries.

Land transfer taxes are paid by the buyer alone and are collected when you take possession of the deed to your new home. Make sure you include the land transfer tax in your budget for closing costs.

Like property tax, land transfer taxes (and land transfer, land title or registration fees) can vary considerably.

In Ontario, for example, a typical $365,000 house would carry a land transfer tax of about $3,675, while in Saskatchewan, the land title transfer fee would come to about $1,095. In Alberta, the same house could carry a fee of as little as $123!

Exemptions for first-time homebuyers
The good news is that first-time homebuyers can benefit from a land transfer tax rebate in Ontario, British Columbia, and Prince Edward Island, as well as the city of Toronto.

Depending on the value of the property, the rebate rate varies from partial to a full 100%.

Check online to find out if you qualify and for info on how to apply. It’s a generous perk that only first-time homebuyers can benefit from.

Achieve the homeownership dream sooner