Most of you probably pay your property taxes monthly, usually as part of your mortgage. (At least, if you’re Canadian) Your mortgage lender usually offers this service for free,where they hold the tax money for a little while and then forward it onto the city. The bank gets to use some of your money for a little while for free, and in exchange you know your property taxes will get paid. It seems like a pretty good trade-off.
So if that’s the case, why was I down at city hall this morning paying my 2013 property taxes, even though they’re not due until the end of August? It’s simple. My town, like many others, gives you a discount if you prepay property taxes. We like discounts, right?
I saved 3.5% by paying my taxes 7 months early. You might look at that number and scoff, because it’s only a measly 3.5%. That’s (checks fingers) less than 4%. Big whoop. You’re less excited than my last girlfriend when I took her to the hockey game for her birthday. Maybe that’s why I don’t have a girlfriend anymore.
You should be excited though, and here’s why. If you can get 3.5% guaranteed for a 7 month return, that translates to a 6% return annually. Current 1 year GIC rates are, well, a crap-ton lower than that. You’re not even going to do that good buying bonds, especially in today’s low interest rate environment. It’s about as good as you’re going to do without taking any risk.
It’s not just my town that offers it. Many other cities offer a discount if you prepay property taxes. I spent a little time on the Google machine, and found cities such as Winnipeg, Lethbridge and Brandon all offered discounts if you prepay. That’s as far east as I got before I got bored. Other places might offer a prepayment discount too, but if they’re anything like my town, they won’t be very vocal in advertising it. After all, no local government really likes losing revenue. You’ll have to call or send an email. Or maybe go down to your local city hall and drop by for a visit. They’ll pretend to be nice while answering your stupid questions, and then mock you once you’re out of earshot. Sounds like fun.
Many communities want you to sign up for a monthly withdrawal program, calling that a prepayment. I give them credit for trying, but offering to let someone pay their taxes in equal installments would be a nicer perk if EVERY OTHER CITY IN THE HISTORY OF EVER DIDN’T ALREADY OFFER THE SAME DAMN PERK. Sorry, I got a little excited there.
Your prepayment is always based on the previous tax year, so you’ll usually have a small balance to pay once property taxes come due, since taxes have a habit of rising every year. I blame cute dolphins, for some reason.
I’m not sure if such a thing exists in the United States, and I’m altogether too lazy to Google that crap. American readers, chime in. If you guys need me, I’ll be rubbing the 100 or do dollars I saved by prepaying my property taxes all over my naked body.