How can I get around prepaying property taxes?

Q: My property taxes are billed quarterly but I can choose a monthly pre-authorized debit through my bank. I don’t want to give money to the municipal government before I have to, so what’s the smartest financial move?

A: The answer to this question is simple. And I’ll show you what I mean. But we’re going to take a bit of a detour in order to get there.

To start with, let me tell you that the Number 1 driving force in my life is my health. That being the case, all decisions I make go through my health filter. I do this by asking myself, “Does my answer to this decision improve, or take away, from my health?” And I don’t just mean physical health. I include my mental health, relational health, financial health, emotional health and spiritual health.

These filters tend to make my decisionmaking easier. If one of my answers conflicts with my highest priorities, which happens on occasion, then I need to go back and rethink my decision so the answer aligns better with what’s most important in my life. I find that this strategy can prevent a lot of heartache and regret.

Coincidentally, the Number 2 driving force in my life is simplicity. And so my second question is, “Does my answer to this decision add simplicity to my life or decrease it — and, therefore, add unwanted complexity?”

On the surface, these questions sound incredibly basic. But you may be surprised at some of the responses you come up with.

To answer your question, you could determine the driving forces in your life and then use my filter method. Perhaps, like me, it’s health and simplicity. Or the time you spend with family. Or maybe your church, mosque, synagogue or temple comes first in your life. Emotional calm could be your driving force, if you didn’t have that earlier in your life. Or financial security by retiring at age 60.

This is your life, so I encourage you to decide what is most important in it and make decisions, large and small, based on those priorities. Remember the adage: Life is not a dress rehearsal. This is it.

Now let’s return to your inquiry and assume that simplicity is one of your highest priorities.

If you currently work for a salary or have ever done so, you’ll recall that your employer withheld income tax from each paycheque and remitted those dollars directly to the CRA (Canada Revenue Agency). Of course, the income tax owing on what you earned wasn’t actually due until April 30 of the following year, but your employer was obligated to withhold those taxes — neither you nor they had a choice in the matter.

I guess you could say that you gave money to the federal government before you really had to. But, given the choice, you might even elect for this to be the case. Otherwise, you’d have to be very diligent to tuck aside those tax dollars until you file your tax return the following April.

As you might suspect, the CRA doesn’t trust that all taxpayers will do this, and without withholding taxes in place, they’d have to be out knocking on thousands of doors, looking for the billions of tax dollars owing to them. And I believe that for many folks, coming up with the money for their income tax bill all at once would be a perpetual problem, getting worse year after year.

So the CRA decided — for their simplicity — that we’re obligated to remit our income taxes at the source where they were earned. This obligation might actually be the simplest way for the taxpayer, too.

So back to your municipal property taxes and my little filter system. What would be simpler for you and your specific financial situation? Would you prefer a monthly, automatic debit, right from your bank account? Or would you find it simpler to be invoiced each quarter?

Perhaps you have a set monthly income or pension, and allocating some of these monies every month will stabilize your cash flow. And that might feel better than a larger lump sum that’s due every three months. In that case, the pre-authorized debit is the simplest option.

Alternatively, you might have a bonus from work that is paid every quarter, or a dividend of a stock you own that is issued quarterly. If so, you may wish to allocate some of these dollars toward your quarterly property tax bill.

Unquestionably, there’s no right or wrong answer; there’s only a best option for you and your financial situation. So forget about the government having your money early, and pick what you want out of life. Determine your driving forces, select your filters, and life will feel so much more within your control — possibly simpler, too.