Home appraisal vs. tax assessment: What every Canadian property owner needs to know

Let’s break down the key differences, when each type of appraisal is used, and why one could impact your wallet more than the other.

What is a home appraisal vs. tax assessment?

A tax appraisal—often known as a property assessment—is conducted by your municipality or province to determine your home’s assessed value for taxation purposes. It’s what your local government uses to calculate your property taxes. These assessments are usually done every few years and are based on mass appraisal systems, not individual inspections.

For example, the Municipal Property Assessment Corporation (MPAC) in Ontario uses computer models to estimate property values based on recent sales, location, and general market trends.

A home appraisal—also called a market value appraisal—is conducted by a professional appraiser who assesses your property’s value based on its current condition, upgrades, features, location, and comparable sales. This is the appraisal used by lenders, lawyers, and accountants for financial decision-making.

You might need a home appraisal if you’re:

• Selling your home
• Refinancing your mortgage
• Settling a divorce
• Tax planning for capital gains
• Conducting retrospective valuations for estate or probate
  

Unlike a tax appraisal, a home appraisal reflects the true market value of the property at a specific point in time—and it often involves a thorough onsite inspection.

Why the difference matters

Here’s where many home owners get caught off guard: They assume their assessed value (from the city) is the same as their market value (from an appraiser). In reality, these numbers can vary by tens or even hundreds of thousands of dollars.

Let’s look at an example:

You’re planning to sell a rental property that you bought in 2004 for $300,000. Your city property assessment shows an assessed value of $450,000, but a professional appraisal shows the fair market value is $600,000. That $150,000 difference can seriously impact your capital gains tax calculation—and how much you owe the Canada Revenue Agency (CRA).

This is especially important when you need a retrospective appraisal, such as for inherited property, an estate division, or determining the fair market value at a date in the past.

Do you need a home appraisal or a property assessment?

Whether you require information from a professional home appraisal or a city property assessment depends on what you’re doing—but in most cases, a home appraisal is probably what you’re after.

Final thoughts: Knowledge is tax power

Understanding the difference between a tax appraisal and a home appraisal is more than just semantics—it can help you make smarter financial decisions and avoid overpaying in taxes, and even strengthen your case in legal disputes.

In situations like selling a home, refinancing, or settling an estate, it’s important to remember that your municipal assessment may not reflect your property’s true market value. A certified appraisal offers an independent, well-documented valuation that the CRA will recognize—helping to ensure you base critical decisions on the most accurate number available.

Read more about real estate:

• What’s better for buying a second home: HELOC or personal loan? 
• Where to Buy Real Estate in Canada
• 5 smart strategies for renewing your mortgage
• Buying a new build? You may qualify for a CMHC Eco Plus refund
• Co-ownership is making Canadians’ cottage dreams more affordable

About Tejveer S. Walia, P.App, CRA

Tejveer S. Walia is is a designated appraiser with Appraisal Institute of Canada (AIC) and the founder of Walson Consulting Inc., serving homeowners, lawyers, and estate professionals across the Greater Toronto Area (GTA).

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