Property tax deferral programs free up money for other expenses
If you’re worried about your retirement income, property tax deferral might be an option.
Many provinces and municipalities in Canada provide property tax deferral programs for seniors to free up your money to help with other retirement expenses.
The property tax deferral option is particularly relevant in this current economic climate, with many Canadian seniors and pre-retirees concerned that their retirement savings may fall short of their ideal retirement goals.
According to a recent BMO Economics report, the prospect of a prolonged period of subdued investment returns after the recent rebound suggests that Canadian personal savings trends, on average, are on the light side for adequate retirement purposes. The report states that Canadians need to ramp up their savings in coming years – from the current five to six per cent range to just under nine per cent – if they hope to meet their longer term financial goals.
A recent BMO report on retirement preparedness found that 40 per cent of Canadians are not confident in their ability to save for retirement and 29 per cent anticipate having to delay their retirement or work part-time during retirement as a result of a shortfall in savings.
“Our research indicates that many Canadians feel they’re not saving enough and are looking for additional ways to stretch their income in retirement,” said Chris Buttigieg, Senior Manager, BMO Wealth Planning Group, BMO Financial Group. “There are several ways Canadians can make up for this savings shortfall, including downsizing their current residence, delaying retirement, working part-time and taking advantage of opportunities like property-tax deferral programs.”
Mr. Buttigieg noted that, through property tax deferral programs, the taxes owed are considered a deferred payment option from the province or municipality; the funds that would have been used to pay property taxes can otherwise be used towards other retirement expenses or left invested to continue to grow. The deferred property taxes – along with any interest accrued – is then re-paid at the time of the sale of the home, or sooner if desired.
“The property tax deferral program is a great way for seniors to take advantage of the equity they have built in their homes and create more cash flow during their retirement years,” said Mr. Buttigieg.
Property tax deferral programs vary across Canada
Property tax deferral programs for seniors vary, depending on the rules in place in different provinces and municipalities. Below are the details about programs in various jurisdictions across the country. Interested seniors are encouraged to speak with a local municipal representative for more information.
Alberta: New this year, the province of Alberta now offers property tax deferral to people over the age of 65. The province will pay the municipal tax bill and the consumer or estate will owe the province the property tax, plus any interest owed, at a rate of three per cent. The program requires homeowners to have at least 25 per cent in home equity. See here for more details.
British Columbia: To qualify, homeowners must be at least 55 years old and have both 25 per cent equity in their home and fire insurance. The interest rate on the deferred taxes is two per cent below prime and does not compound.
Ontario: Homeowners over the age of 65 can defer paying any increases in property taxes; however, they are still required to pay the base amount. In Ottawa, lower income individuals who are 65 or older, or those with a disability, can defer all property taxes owed at an interest rate of five per cent.
Halifax: Low income homeowners (those with a combined income of $30,000 or lower per year) can pay their property taxes through a pre-determined payment plan, a property tax rebate or property tax deferral.
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