Nobody—and I mean nobody—looks forward to that yellow envelope from the City of Toronto arriving in the mail.
Over the last two years, tearing open that envelope has felt less like a civic duty and more like a punch to the gut. We’ve been through the wringer. First, there was the historic, jaw-dropping 9.5 per cent hike in 2024 that dominated every dinner table conversation in the GTA. Then, just as we caught our breath, 2025 hit us with another 6.9 per cent increase.
It’s been exhausting.
Now, as we stand here at the tail end of 2025, looking down the barrel of 2026, the question on every Torontonian’s mind is simple: Is it going to happen again?
Are we in for another year of record-breaking tax hikes, or will City Hall finally give our wallets a break? The answer is… complicated. But there is a glimmer of hope. 2026 is a special year in the world of municipal politics—it’s an election year. And if there’s one thing politicians hate more than potholes, it’s raising taxes right before they ask for your vote.
In this guide, we are going to tear apart the numbers, look at the new “Luxury Tax” that City Council just approved, and explain why your property assessment is still stuck in a time loop from 2016.
Buckle up. We have a lot of ground to cover.
The 2026 Forecast: A Pre-Election Breather?
If you’ve been following the drama at City Hall lately, you know the vibe has shifted.
Mayor Olivia Chow has had a rough ride. Inheriting a massive budget shortfall—specifically a $1.8 billion hole left by the pandemic and years of keeping taxes artificially low—she had to make some brutally unpopular decisions regarding taxation and potential property tax hikes. That’s where those back-to-back hikes came from.
But the tone for the Toronto property tax increase 2026 discussions is different.
The “Leaner” Budget Promise
Mayor Olivia Chow and her Budget Chief, Councillor Shelley Carroll, have been signaling for months that the 2026 budget will be “leaner.” In late 2025, they started dropping hints that the city is looking to stabilize. They know that Torontonians are tapped out. The cost of living crisis hasn’t gone away; groceries are still expensive, mortgage renewals are hurting, and asking for another 9 per cent tax hike would be political suicide.
With the municipal election set for October 2026, the Mayor needs to show that she can manage the city’s finances without constantly raiding homeowners’ bank accounts.
The Billion-Dollar Elephant in the Room
However—and there is always a “however”—the city is not out of the woods.
Despite the painful increases of the last two years, Toronto still faces a structural deficit. The “New Deal” with the Provincial taxation policies are crucial for funding public services. government (where Ontario agreed to take back the Gardiner Expressway and Don Valley Parkway) helped a lot. It saved the city billions in capital costs, a fact highlighted by the toronto star. But the operating budget—the money used to pay police, run the TTC, and fill potholes—is still short by about $1 billion.
So, what does this mean for the tax rate?
Most analysts and City Hall insiders are predicting a return to more “normal” increases. We likely won’t see zero in terms of tax refunds this year. Inflation is still a thing. But the days of nearly double-digit hikes are likely behind us for this cycle. The expectation is an increase that mirrors inflation plus the dedicated City Building Fund levy—likely landing somewhere in the 3% to 4.5% range, rather than the scary 6.9% or 9.5% figures we’ve grown to fear.
The official numbers drop on February 1, 2026. Until then, we can breathe a little easier, but keep your guard up.
How We Got Here: The 2024 & 2025 Hangovers
To understand where we are going, we have to look at the wreckage of the last two years. It helps to contextualize why your monthly bill jumped so significantly.
For over a decade, Toronto prided itself on having the lowest property tax rates in the GTHA (Greater Toronto and Hamilton Area). Former mayors kept increases at or below inflation. It sounded great at the time, but it created a massive problem: our infrastructure was crumbling, and we had no money in the bank.
When the city of Toronto announces changes to residential property taxes, it often leads to public outcry. pandemic hit, transit revenue vanished. The bill came due for the city of Toronto’s residents.
The Rate Hike Timeline
Here is a snapshot of the recent rollercoaster ride for residential property owners: a projected 9.5 per cent in 2024.
| Year | Residential Tax Increase | City Building Fund | Total Tax Hike, as determined by the municipal property guidelines | Context |
|---|---|---|---|---|
| 2023 | 5.5% | 1.5% | 7.0% | John Tory’s final budget. |
| 2024 | 8.0% | 1.5% | 9.5% | Olivia Chow’s first budget. Historic high. |
| 2025 | 5.4% | 1.5% | 6.9% | Continued deficit management. |
| 2026 (Est) | 2.0% – 3.5% | 1.5% | 3.5% – 5.0% per cent change is projected for the upcoming fiscal year. | Election year “stabilization.” |
Note: The “City Building Fund” is a dedicated levy used strictly for transit and housing infrastructure. It has been increasing by 1.5% annually and is usually added on top of the base property tax rate.
The 2024 hike of 9.5 per cent was a shock to the system. It was the largest single-year increase since amalgamation. The 6.9 per cent increase in 2025 It felt like a slightly softer blow, but it was compounding on top of the previous year’s 2021 hike.
Basically, if you paid $5,000 in taxes in 2023, you aren’t just paying a little more today. You’re paying significantly more.
The New “Luxury Tax”: Hitting the High End
While the average homeowner might get a reprieve in 2026, the wealthiest property owners in Toronto are about to pay up.
Just this month (December 2025), Toronto City Council approved a major change to the Municipal Land Transfer Tax (MLTT). This was a key part of Mayor Olivia Chow’s platform to find revenue sources that don’t hurt the average family struggling with affordability.
What Changed?
Starting April 1, 2026, the MLTT rates on residential properties sold for over $3 million are increasing.
Previously, the “luxury” brackets were a bit more lenient. Now, the city is implementing a steeper graduated rate for high-value homes. The logic from City Hall is simple: if you can afford a $5 million home, you can afford to contribute a bit more to fix the city’s housing crisis.
The New Tiers (Effective April 1, 2026):
- Homes $3M – $4M: Rate increases to 4.5% (approx).
- Homes $4M – $5M: Rate increases to 5.5% (approx), as reported by CBC News.
- Homes $10M – $20M: Rate increases to 7.5%.
- Homes over $20M: A whopping 8.6% marginal rate was proposed by Brad Bradford.
This doesn’t affect the vast majority of Torontonians. In fact, city data suggests this impacts less than 2% of all real estate transactions. But if you are in the market for a luxury home in Rosedale or the Bridle Path, your closing costs just went up by tens of thousands of dollars.
Real estate boards argued this would hurt the market, but Council approved it anyway, citing the desperate need for funding for the TTC and affordable housing projects.
The Mystery of MPAC: Why Your Assessment is Old News
This is the part that confuses everyone, especially regarding eligibility for rebates.
You get your tax bill, and you see an “Assessed Value.” You look at that number, and you laugh. “My house is assessed at $800,000?” you say. “I could sell it tomorrow for $1.4 million!” said the owner, reflecting the current market trends reported by cbc.
Why is the city taxing you on such a low number? Are you getting away with something?
The 2016 Time Capsule
Here is the deal: Property taxes in 2026 are STILL based on the market value of your home as of January 1, 2016.
Yes, you read that right. 2016.
The Municipal Property Assessment Corporation (MPAC) is responsible for assessing every property in Ontario. Usually, they update these values every four years. The last update was supposed to happen in 2020. We all know what happened in 2020.
The Provincial government delayed the reassessment due to the pandemic. Then they delayed it again in 2022. And 2023. And now, heading into 2026, the Ford government has once again kicked the can down the road.
Why? Fear.
Since 2016, property values in the GTA have skyrocketed, but not evenly. Suburban homes might have doubled in value, while downtown condos might have only gone up 40%. If MPAC updated the values to 2026 levels, there would be a massive shift in the tax burden. People in neighborhoods that appreciated rapidly would see their taxes jump overnight, even if the city didn’t raise the rate.
No politician wants to trigger that explosion of dissent regarding a property tax hike right now.
How It Affects Your Calculation
This is crucial to understand: A tax hike applies to your 2016 value, not your current market value.
Let’s do some math.
- Assessed Value (2016): $800,000
- 2025 Tax Rate (Approx Residential): 0.715% (Combined City + Education)
- 2025 Tax Bill: $5,720
If the City of Toronto announces a 4% tax hike for 2026, they are increasing the rate, not your value. Your value stays at $800,000.
So, don’t panic if Zillow says your house is worth $1.5 million. The taxman doesn’t know that yet. Or rather, he knows, but he isn’t allowed to use that number yet.
Breakdown of the Bill: Where Does the Money Go?
When you send that cheque (or set up that pre-authorized debit), what are you actually funding?
It’s easy to complain about “waste at City Hall,” and sure, there is always room for efficiency. But the bulk of your money goes to three main buckets.
1. Emergency Services (Police, Fire, Paramedics)
The Toronto Police budget is the single largest line item in the operating budget. In 2025, there was a massive fight about increasing the police budget. They got most of what they asked for, arguing that response times were too slow. A significant chunk of your tax increase pays for salaries and equipment for first responders.
2. The TTC (Transit)
The “Red Rocket” is a money pit, but a necessary one. Fare revenue hasn’t fully recovered to pre-2019 levels. The city has to subsidize every ride. The City Building Fund (that extra 1.5% levy on your bill) goes almost entirely to capital projects like fixing the subway signals and buying new streetcars.
3. Debt Servicing & Shelter Services
This is the new crisis. The cost of sheltering refugees and the homeless has exploded. The city has been begging the Federal tax relief measures are essential for low-income seniors. government for help here, arguing that refugee settlement is a federal responsibility. They have received some cash, but not enough. A large portion of the budget is determined by the municipal property assessments. 2024 and 2025 tax hikes went directly to keeping the shelter system from collapsing.
Multi-Residential & Commercial: The Other Side
If you are a renter, you might think, “Well, I don’t pay property tax.”
Wrong. You pay it through your rent. And for decades, tenants in Toronto actually got a raw deal. Multi-residential buildings (apartment towers) were taxed at a much higher rate than single-family homes.
The Push for Fairness
Over the last few years, the city has been slowly reducing the “Multi-Residential Tax Ratio” to bring it in line with residential rates. This is good news for landlords and, theoretically, for tenants (though whether landlords pass on the savings is a whole other debate).
For 2026, there is also a new New Multi-Residential Tax Subclass. To encourage developers to build more rental housing, the city offers a reduced tax rate (up to 15% reduction) for new purpose-built rentals. If you are a developer looking at a site in 2026, this is a massive incentive designed to tackle the housing shortage.
Commercial and Industrial Properties typically see smaller percentage increases than residential homes—usually half the residential rate increase of one per cent. For example, in 2025, while homeowners faced a 5.4% base hike, commercial properties saw a 2.7% base hike. This is to prevent small businesses on Queen Street from going under.
How to Lower Your Bill (Relief & Appeals)
Okay, the bill is high. Can you pay less? Maybe.
1. Tax & Water Relief for Seniors and Persons with Disabilities
If you are a low-income senior or have a disability, the city of Toronto’s tax relief program may assist you. City of Toronto has a program aimed at you. You can apply to defer your tax increase or have it cancelled entirely.
- Cancellation: If your household income is below a certain threshold (around $55,000), you might not have to pay the total tax hike, depending on eligibility. increase. You still pay the base, but the hike is waived.
- Deferral: You can push the taxes off until you sell the home or pass away. It’s essentially a low-interest loan from the city to help you stay in your home.
2. The Vacant Home Tax (VHT)
This isn’t a relief program, but avoiding it is a form of relief! Critical Reminder: You MUST declare your occupancy status every year. The deadline for the 2025 occupancy year (declared in early 2026) is usually tied to the assessment value of your multi-residential property. February 28, 2026. If you forget to declare, the city assumes your home is empty and slaps you with a tax of 3% of your Assessed Value. On an $800,000 assessment, that is a $24,000 penalty. Do not forget this. The system was a disaster in 2024 with glitches and wrong bills, but they claim to have fixed it.
3. MPAC Appeals (Request for Reconsideration)
If you think your 2016 assessment is actually higher than what your home was worth in 2016 (rare, but possible if you demolished a garage or the house is damaged), you can file a Request for Reconsideration (RfR) with MPAC. It’s free, but you might miss out on potential rebates.
FAQ: Your Burning Questions Answered
Q: Will property taxes go down in 2026? A: The rate will almost certainly not go down. The city’s costs (wages, fuel, materials) are up. However, the increase will likely be smaller than the massive hikes we saw in 2024 and 2025. Mayor Olivia Chow has promised a “leaner” approach for the election year.
Q: When will we know the final 2026 tax rate? A: The budget is usually finalized by City Council in mid-February. The Mayor releases her budget by February 1, 2026, and Council votes shortly after.
Q: Why is my tax increase higher than 6.9%? A: If you did renovations that increased the value of your home, or if the “phase-in” of your assessment is still adjusting (though this is rare now given the freeze), your individual bill might vary. Also, check your water usage—that’s a separate utility bill but often lumped mentally into “city costs.”
Q: What is the City Building Fund? A: It is a dedicated levy that started years ago to fund transit and housing. It increases by 1.5% every year automatically, regardless of what the “base” tax hike is. Even if the Mayor announced a “0% tax freeze,” your bill would likely still go up 1.5% because of this fund.
Q: Is the Luxury Tax retroactive? A: No. The new MLTT rates for homes over $3 million apply to transactions closing on or after April 1, 2026. If you buy before then, you pay the old rates.
Conclusion
Look, living in Toronto is expensive. There is no sugar-coating it. We pay a premium to live in Canada’s economic engine.
The last few years have been a wake-up call. We realized that for too long, we weren’t paying the true cost of running this massive city, and the infrastructure debt caught up with us. The 9.5% and 6.9% hikes were painful medicine.
The outlook for 2026 offers a bit of a psychological break. With an election on the horizon, City Hall is motivated to keep things calm. We likely won’t see another sticker-shock year. But the underlying issues—the shortfall, the transit needs, the housing crisis—aren’t solved yet.
For now, keep an eye on the mail in early 2026. Remember to file your Vacant Home declaration. And maybe, just maybe, be thankful that MPAC hasn’t updated your assessment to 2026 market values yet. That is a bill none of us are ready for.