If you own property in Nova Scotia you’ll have received an assessment notice in the past few weeks. Because property taxes levied by municipalities are largely based on your assessment you might be thinking about an appeal of your assessment. It might be, but there are risks and it’s important to know that if you are a residential property owner, even a successful appeal is unlikely to reduce your property tax bill.
Generally speaking, residential property owned by Nova Scotians is eligible to be capped. In this case, your assessment notice will have two assessment values for your property. The first is a market value assessment which is intended to be a reflection of what your property would have been worth in its current state if it had been sold on January 1, 2010 (for assessments received this year). You’ll also see a capped assessment value if your market assessment increased by more than CPI (this year that is 3.9%). If your property is one of the minority which saw its market increase by less than 3.9%, then the market and capped assessment will be the same. For more details about what is and is not capped you can read the government's briefing note on it.
So, appeal your assessment, win, and your property tax goes down right? Not quite. It’s more complicated than that.
Your property tax is based on the capped assessment, not the market value. You can only appeal the market value of your assessment. In many cases, the capped and market assessments are sufficiently different that even a reduction in the market assessment still won’t bring that amount below the capped assessment. Thus your taxes won’t change even with a successful appeal because the capped assessment won’t change.
There is one other wrinkle. While the capped (or taxable) assessment won’t go down, it could go up during an appeal. During many appeals Property Valuation Services Corporation staff visit your property to ensure their information is accurate. If they find an addition or improvement has been made to the property, or they underestimated the size of your property, your market value could be increased. Usually this increase would also be added on top of the capped assessment, resulting in a higher value for taxation.
For business property owners it’s a whole different ballgame. Business properties are not capped. As a result, any appeal directly impacts the taxable assessment value. Business assessments are a discussion for another day, but one side effect of the residential cap is that if municipalities don’t adjust their tax rates each year to accommodate for the impact of the cap, businesses pay a rapidly increasing proportion of property taxes in a municipality.
At the end of the day, no matter what type of property you have, it’s important to remember that assessments are intended by law to reflect what you could sell that property for. The actual tax rate is set by municipalities, and even with a capped residential assessment, the tax rate, and other municipal fees, can still be increased
The cap does not prevent property tax increases, it only changes the relative balance of tax revenues for municipalities between residential and commercial properties.
So if you choose to appeal your property assessment, be sure you know the pros and cons.
