Manitoba will begin phasing out education property taxes by implementing the Education Property Tax Rebate. Property owners will receive an Education Property Tax Rebate cheque to reduce a portion of their education property taxes. No application is required.
The following is not an opinion of the new rebate, it’s an explanation of how it works.
Residential and farm properties
For 2021, owners of residential and farm properties will receive a 25% rebate of the school tax portion of their property taxes. Residential properties include single dwelling units, condos, and multiple unit dwellings.
The new Education Property Tax Rebate will be based on the school tax before the Education Property Tax Credit Advance. As part of the new Education Property Tax Rebate, other tax credits and rebates will be proportionally reduced.
Education Property Tax Credit Advance
The usual Advance most of us homeowners are familiar with is reduced from $700 to 525 for 2021. When you receive your property tax bill in the mail you will notice that the amount payable is at least $175 more than the previous year since the Education Property Tax Credit Advance is less.
If the school tax portion of your property tax bill in 2020 was less than $700, then the education portion of your property tax bill would have been reduced to zero. For 2021, if the education portion is less than $525, then it will still be reduced to zero. If it is more than $525, then there will still be an amount payable for the education portion.
All property owners will receive the new Education Property Tax Rebate. If you currently do not pay education property tax on your property assessment because of existing advance, the new Education Property Tax Rebate will be extra cash for you!
Seniors School Tax Rebate
The Seniors School Tax Rebate was a maximum of $470 in 2020; it was reduced by 2.0% of family net income when net family income was over $40,000; it is zero once your net family income reached $63,500.
The new amounts for 2021 for the Seniors School Tax Rebate is $353; it will be reduced by 1.5% of family income over $40,000.
School Tax Credit for Homeowners
For lower income seniors (55+; less than $23,800 family income), there is another school tax credit available. This credit is calculated and appears on your annual income tax return (form MB479). For 2020 and prior years, it was up to $400, reduced by 1.0% of family net income. For 2021, it is reduced to $300 and will be reduced by 0.75% of net income. Once net family income exceeds $23,800, there is no credit paid.
Farmland School Tax Rebate
The Farmland School Tax Rebate is also affected. It used to be up to 80% of school tax to a maximum of $5,000. Now it is reduced to 60% of the school tax to a maximum of $3,750. The reduced rebate will be offset by the new Education Property Tax Rebate that will be mailed before the payment deadline.
A reminder to anyone who has some acreage: check your property tax bill to see if a portion of your assessed property is for “farmland”. It doesn’t matter if you actually farm the land or not. If you have “farmland”, then you can apply for the Farmland School Tax Rebate. You apply after the normal property tax deadline once your property taxes are paid in full. The application will be available on the Province of Manitoba website later this year. The filing deadline is March 31 the following year. For 2021 property taxes, you have until March 31, 2022 to apply for the Farmland School Tax Rebate.
When we are filing personal income taxes each year, we normally ask to review your property tax bill. We confirm you received the basic $700 credit. And we also check to see if a portion of your assessment is for farmland and inquire if you normally apply for the Farmland School Tax Rebate each year and if not, we usually provide some info about it.
How am I saving 25%?
Here is an example of how you save 25% on the education portion of your property taxes.
If the school tax portion of your property taxes was $1,700 in 2020 you would have received the advance of $700 and the net you would have paid is $1,000.
In 2021, the same $1,700 will be reduced by the new advance of $525 to a net of $1,175; you will also receive a rebate cheque in the mail for $425 ($1700 x 25%) before the payment due date. For 2021 the net you pay is reduced to $750 ($1,175 – 425) compared to $1,000 in 2020. A reduction of 25%.
Owners of other properties (such as commercial or designated recreational) will receive a 10% rebate of the total of both the school division special levy and the education support levy payable. Some of us have a portion of our residential property taxes designated as “other”, so this “other” portion will only have a 10% rebate instead of the 25% for the residential or farm assessed portions of the education taxes.
To account for the fact that landlords of residential buildings and not renters will be receiving the Education Property Tax Rebate, the annual rent guidelines will be set at 0% for 2022 and 2023.
Using a possible 1.6 per cent increase for comparison purposes, monthly rent of $1,200 would remain at $14,400 annually in 2022 versus increased to $14,630.
By setting rent guidelines to 0%, it will partially offset the reduction in the education property tax credit.
Without the rebate, in 2022, the renter would pay $14,630 less the $700 credit for a net cost of $13,930. Instead, the rent will remain at $14,400 less the credit of $525, for a net of $13,875 in 2022, a saving of $55.
Did not get the rebate cheque?
What happens if you do not receive the cheque before the payment deadline or if you lose it? A request for a replacement cheque can be made by contacting Manitoba Government Inquiries at 1-866-626-4862.
The above changes will make filing the 2021 taxes another interesting year for us tax preparers. One more item in addition to the many changes we keep on top of each year to make sure you get the best tax reconciliation possible!
To protect those around us who cannot get vaccinated for medical reasons, I encourage everyone who can, to get vaccinated asap! We all need to do our part to get our society back to a “new” normal: to socialize again and to get all businesses open again.
Getting vaccinated to protect others is the most unselfish thing we can do!
Anni Markmann is a Personal Income Tax Professional and Certified Financial Planner; living, working, and volunteering in our community. Contact Ste Anne Tax Service at 204.422.6631 or 36 Dawson Road in Ste Anne (near Co-op) or email@example.com