Don’t be fooled into thinking your taxes won’t increase
A new valuation date
Starting this tax year (2025), the valuation date for your property assessment will be January 1 of the previous year – 2024, in this case – instead of the current year. This means that your assessment will be based on market activity, not during the past year, as was the case up to this point, but during the year before that.
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The previous Provincial government started tinkering with some improvements to the property tax system, and this ended up being one of them. They didn’t undertake anything fundamental, of course, as former Premier Blaine Higgs didn’t believe that the system is as broken as it is, but they made some changes nonetheless.
And changing the valuation date to a year in the past is one of the things that I argue they badly needed to do. Why? Because it brings us in line with best practices elsewhere in Canada in that it allows assessors to incorporate a whole year’s-worth of sales in determining assessed value rather than just those from part of a year.
Let’s look at what that means and how it affects you.
To this point
Before 2025 in New Brunswick, assessments supposedly reflected “Real and True Value” (interpreted as market value) as of January 1 (the valuation date) of the current tax year. So, for the 2023 tax year, for instance, your assessed value would have been based on sales that theoretically occurred in the 12 months prior to January 1, 2023, i.e., all of 2022.
The problem was that your assessment did not reflect market activity in all of those 12 months. In fact, assessors were lucky to obtain, analyze, and incorporate sales from January to May of the previous year, due to data availability and time constraints. That’s only five months. This meant that any market activity occurring from June to December of 2022 was not part of the January 1, 2023, assessed value.
And in a jurisdiction whose assessments are supposedly based on “Real and True Value” as of the valuation date, there was nothing “Real” or “True” about assessments that were missing seven months’-worth of data.
Ch-Ch-Ch-Changes
In the wake of the 2017 assessment debacle, with which many New Brunswickers are all too familiar, the Auditor General made several recommendations. One of the most important of these was to separate the assessment notice from the tax notice so that people would start to understand that these are two different processes. This was a step in the right direction because it has helped taxpayers better understand who is responsible for what.
This separation of notices then engendered further changes, such as issuing the assessment notice in October of the year prior to the valuation date – a dumb idea if there ever was one – to then eventually changing the valuation date to January 1 of the previous year – a much better idea. This brings us to 2025.
Remembering the purpose of assessments
Now, you might think that relying on a date sometime in the past is the very opposite of “Real and True Value” – after all, the market can change a lot between that date and January 1 of the current tax year. However, it’s important to understand what the purpose of assessment is and what it is not.
Assessment supposedly decides how much tax an owner should be paying relative to other owners, not as a means of raising additional revenue for either the Province or the municipalities (i.e., taxes should not increase just because assessments do). That being the case, it doesn’t matter what valuation date a tax jurisdiction uses, as long as everyone’s assessment is based on the same data and the same valuation date.
So what should I expect when I receive my 2025 assessment notice?
Remember that 2025 is a transition year. Everything is going to be just a little different from what has been the norm.
The first thing to recognize is that, even though both your 2024 assessment and your 2025 assessment are based on a January 1, 2024, valuation date, the “Real Property Assessment value” (as they call it on your Property Assessment Notice – the one that says, “This is not a bill”) will not necessarily be the same.
The reason for this goes back to what I said above about assessors having a whole year’s-worth of sales to work with. While your 2024 “Real Property Assessment value” would have been based on sales that occurred in January to May of 2023, your 2025 “Real Property Assessment value” will be based on sales that occurred throughout all of 2023.
If the market increased at all during those last seven months of 2023, you could expect to see a bump in the “Real Property Assessment value” for 2025. I can’t imagine that it would be a large bump, but that’ll depend on where you live. Just don’t be surprised if you see it.
What about my “Assessment for Taxation”?
The “Spike Protection Mechanism” (SPM)
The “Assessment for Taxation” section is where the monumentally stupid “Spike Protection Mechanism” comes into play.
The Spike Protection Mechanism is the method the Province uses to ensure that the assessment on which your taxes are based cannot increase by more than 10% in any given year, regardless of the valuation date. The government will still base the actual increase in your taxes on whatever tax rate is applicable, but the increase in the taxable assessment itself is limited.
“Why is this monumentally stupid?” you may well ask. I’ll be looking at this in depth in the next couple of weeks but the short answer is that you can’t apply an assessment solution to what is a tax problem (only a change in tax rates can do that). It’s like trying to fix an electrical problem in your house with plumbing tools. The SPM creates all sorts of ever-increasing inequities in the system and it only delays tax increases; it doesn’t offset them.
What this means for your 2025 taxes
If the SPM limited your “Assessment for Taxation” in 2024 to something less than your “Real Property Assessment value” (as it did in my own case, for example), the “protection” for 2024 will expire this year. This means that your 2025 “Assessment for Taxation” will either approach or equal your “Real Property Assessment value” and you will have to pay tax on that higher amount.
Pulling it all together: Using my own property as an example
Based on a January 1, 2024, valuation date, my 2024 “Real Property Assessment value” was $123,600, while the SPM made my 2024 “Assessment for Taxation” $113,500 (which represents a 10% increase of my assessment from 2023).
Based on assessors having a full year’s-worth of 2023 sales, it’s likely that my “Real Property Assessment value” with a January 1, 2024, valuation date will increase to something more than $123,600 in 2025, say $125,000 for the sake of demonstration.
However, the SPM will once again ensure that, for 2025, my “Assessment for Taxation” can increase by no more than 10%, rendering $124,900 ($113,500 x 1.1) for that purpose, regardless of what my “Real Property Assessment value” is. Assuming no change in the tax rate, I would therefore expect my taxes to increase by 10%, despite 2024 and 2025 having the same January 1, 2024, valuation date.
And I live in a rural district, so I’m thinking my tax rate will likely increase as well. Thus, my overall tax increase could end up being in excess of the 10% I’m already expecting.
Now, I recognize that my assessment is fairly low compared to some, so the dollar amount of the increase is not a stab through the heart for me the way it would be for a property owner with a house assessment of $300,000. If you’re in that boat, a 10% tax increase could well put a problematic dent into your budget.
To summarize
Bottom line for property owners? Beware of complacency in expecting what a January 1, 2024, valuation date for 2025 might mean for you and your household. Don’t expect that Property Assessment Notice mailed on January 20 to show the exact same value it did last year, neither the “Real Property Assessment value” nor the “Assessment for Taxation” value, if applicable.
More importantly, when your Real Property Tax Notice arrives at the beginning of March, definitely don’t expect that figure to be the same as least year’s, particularly if you were eligible for the Spike Protection Mechanism in 2024.
One more point on the valuation date change: if you choose to challenge your assessment in 2025 (there’s a book for that, as it turns out), you’re going to have to make your case with sales that occurred in the 12 months prior to January 1, 2024 (i.e., throughout 2023). Using any sales from after that date won’t help, neither at the Request for Assessment Review stage, nor at the Appeal stage, if it gets to that.
That’s the year-prior valuation date change in a nutshell. Forewarned is forearmed.
This piece was first published in the Northumberland Free Press, 2025-01-11