A tax class represents a group of properties that are subject to their own tax rate. Every property is assigned a specific class according to its use. A property’s use determines its tax class. Properties are divided into seven standard property classes established by the Province: Residential, Commercial, Industrial, Managed Forest, Conservation Lands, Farm, - Multi-residential.
Municipalities have the ability to set different tax rates for different classes of property.
The Seven Standard Property Classes
The residential property class consists of land used for low density residential purposes, such as single family houses or condominium units, land used for residential purposes on a seasonal basis including campgrounds, land owned by a co-operative or a corporation without share capital, or a group home. The residential class also included specific lands not used for residential purposes, such as farm land that does not fall in the farm land class, land owned by a non-profit organization and used for child care purposes, land owned and occupied by a religious organization not used for commercial activity, land owned by a conservation authority, and land owned and occupied by a non-profit service organization.
This class consists of land that is used for residential purposes that has seven or more self-contained units. An additional class which identifies new multi-residential buildings is available. The class enables municipalities to encourage the development of new multi-residential housing stock by imposing a lower tax rate on these new buildings than they do on older multi-residential properties.
The commercial class includes all land that is not included in any other property, including hotels and motels. This class also includes property that does not contain seven or more self-contained residential units, which is operated on a for-profit basis and is used for residential purposes where the residents receive assistance with their everyday living (e.g. residents are provided meals and personal care). This includes homes for the aged, homes for special care, retirement homes and nursing homes operating as commercial ventures.
The industrial property class consists of land used for, or in connection with, manufacturing, producing or processing, as well as lands used for research and development and storage activities in connection with manufacturing, producing and processing. The class also includes land used for generating or transforming hydroelectricity.
This class of property consists of pipelines as they are presently defined in the Assessment Act. The Minister of Finance has prescribed assessment rates by regulation using the same base year value as all other properties.
The farmlands classification is taxed at 25 percent of the residential tax rate. Subject to certain restrictions detailed in Ontario Regulation 282/98, land used for farming, including outbuildings, is included in this class. Qualification for the farmlands class is based on the criteria for qualification for the former Farm Tax Rebate Program that applied in 1997.
Eligible managed forests are taxed at 25 percent of the residential tax rate. This class consists of land that is subject to a managed forest agreement. If the land is used for other purposes, it will be reclassified and the tax preference will be eliminated. Furthermore, it is intended that the tax break that the property had enjoyed as an eligible managed forest will be recovered for the year or portion of the year in which it ceased to be eligible and such change can be made by the assessor up to four years later.
Classification of Mixed-Use Properties
Since some properties may have multiple uses, portions of a property may be assigned to different tax classes. For example, a building with an apartment above a retail store would have the upper portion classed in the residential class and the lower portion in the commercial class.
Optional Tax Classes
In addition to the seven standard property classes specified in the Assessment Act, the Minister of Finance can prescribe more classes by regulation. To date, the Minister has prescribed the following five additional classes: new multi-residential property class, office building property class, shopping centre property class, parking lots and vacant land property class, and large industrial property class. These five additional classes are all optional, that is, upper tier and single tier municipalities have the flexibility to decide which, if any, of the optional classes will apply within the municipality.