Why Is TD No Longer Paying Your Property Taxes?

TD has been winding down its "Bank to Pay" property tax service. Since 27 February 2023 it has not been offered on any new TD mortgage, and many existing borrowers have since received a letter, a refund of their tax account balance and instructions to pay their municipality directly. TD Bank property taxes are now, for most borrowers, the homeowner's job.

For years, many TD mortgage payments carried two parts: the mortgage itself and an extra amount for property taxes. TD held the tax portion in a property tax account and paid the municipality when each bill fell due. The homeowner saw one payment and never dealt with the city's tax office directly.

That arrangement is being withdrawn. A TD broker update set the first step: effective 27 February 2023, the Bank to Pay property tax feature would not be available on any new TD mortgage, and every new customer would make their own arrangements with their municipality. The same update said Bank to Pay was no longer required on existing high-ratio or default-insured mortgages, and applications already in progress before that date could keep it.

The second step reached existing borrowers. From 2024, homeowners began reporting letters telling them that TD would no longer collect and pay their property taxes, that they would pay their municipality directly from now on, and that TD might ask for proof of payment. Many then received a deposit labelled as a property tax refund, which was the balance sitting in their tax account. Municipalities noticed too: in November 2024 the Town of Drayton Valley in Alberta publicly encouraged TD mortgage holders to join its own tax instalment plan after TD stopped remitting for them.

TD has not published a detailed public explanation, and reports at the time noted that some of its own web pages still described the old service. So treat your letter as the authority on your mortgage. It says when your last bank-paid instalment was, whether a refund is coming, and what proof, if any, TD wants from you.

Three groups are affected differently. New TD mortgage customers since 27 February 2023 never had the option, so for them nothing has changed: they have paid their municipality directly from day one. Existing borrowers whose mortgages still carried a property tax account are the group receiving letters. And borrowers who had already opted out to pay their own taxes see no change at all.

Within the existing group, the type of mortgage matters less than it once did. High-ratio mortgages, those with less than a 20% down payment and mortgage default insurance, were historically the loans where a lender was most likely to insist on collecting taxes. TD's 2023 update removed that requirement for active high-ratio and default-insured mortgages, which is part of why insured borrowers were among those moved to paying directly.

The change is also not confined to one province. Property taxes are municipal, so the practical steps depend on where the home is. A homeowner in Toronto deals with the City of Toronto's revenue services, a homeowner near Edmonton with their own town or county, and so on. The bank's letter is the same; the municipal paperwork is local.

If you hold a mortgage with another lender, nothing here applies to you automatically. Many Canadian lenders still offer a property tax account, and some still require one for certain mortgages. But the TD change is a useful prompt to check how your own taxes are paid, because a homeowner who assumes the lender is paying, when it is not, finds out from a penalty notice.

Finally, anyone who owns more than one property should check each mortgage separately. A rental condo and a principal residence financed at different times can be on different arrangements, and only one of them may have changed. Landlords in particular should read section 09, because a change in who pays the bill is a good moment to check that the tax on a rental is being claimed correctly. Our real estate accounting team sees this most often with owners of two or three properties.

Lenders historically collected property taxes to protect their security, not as a favour. Unpaid property taxes are a debt the municipality can enforce against the property itself, and that claim typically ranks ahead of a mortgage. A lender that pays the taxes knows the property cannot be lost to tax arrears, so it pushed for the arrangement where the risk was highest.

Running that service is costly. A national lender has to track bills from hundreds of municipalities, each with its own billing cycle, instalment dates and format. It has to estimate each borrower's tax a year ahead, collect a matching amount with every mortgage payment, catch shortfalls when a reassessment or a budget increase raises the bill, and refund surpluses. Errors land on the bank, and on the homeowner's relationship with their city.

TD has not publicly set out its reasons, so any explanation is inference. The plausible ones are the administrative burden above, the fact that the default insurers' requirements no longer pushed lenders to collect taxes, and the shift towards municipal pre-authorized payment plans. Those plans now do the main job a lender's tax account used to do: spreading one large bill into manageable monthly payments.

For the homeowner, the trade is control in exchange for responsibility. You now see the bill when it is issued, you choose how to pay it, and you can spot a reassessment straight away rather than months later through a changed mortgage payment. In exchange, a missed payment is now your problem rather than the bank's.

That is also why some letters ask for proof of payment. The lender still cares that the taxes are paid, because its security still ranks behind a municipal tax claim. Expect your mortgage terms to let the lender ask for evidence that taxes are current, and to treat unpaid taxes as a breach of the mortgage. Read the terms of your own mortgage rather than assuming; wording varies by product and by when you signed.

When TD closes a property tax account, any balance it was holding for future instalments comes back to you. That is the "property tax refund" many borrowers saw arrive shortly after their letter. It is your own money returned: the extra amounts you paid with each mortgage payment that had not yet gone to the city.

It is not a refund from the municipality and not a tax overpayment. Its size depends on timing. A borrower whose account was closed just before a large instalment was due will get back most of the next bill. One whose account closed just after the bank paid an instalment will get back much less. Either way, the amount is earmarked for property taxes you have not yet paid.

It is also not income. The refund is a return of amounts you paid into an account held for you, so it does not go on your income tax return. Any interest you later earn by parking the money in a savings account is a different matter: interest is taxable in the year it is earned, unless the account is a tax-free savings account.

The most useful thing to do with the refund is to reconcile it against your municipal account the day it arrives. Look up the property's tax account with your city, check which instalments the bank actually paid, and compare what is still owing for the year with the refund you received. Some homeowners found the bank had paid well ahead; others found the next instalment was due within weeks.

A worked example

Suppose a Toronto homeowner's 2026 tax is $4,800 and TD collected $400 a month towards it. If TD paid the interim instalments and then closed the account at the end of May 2026 with $800 left over, that $800 comes back as the refund. The final bill's three instalments, due 2 July, 4 August and 1 September 2026, still have to be paid, and the homeowner now pays them directly. The refund covers part of that; the rest comes from the household budget.

The risk is treating the deposit as a windfall. It looks like unexpected money, it arrives without a bill beside it, and the next instalment may be weeks away. Move it into a separate account the day it lands, so it is still there when the city's due date comes round.

The first month after the letter is when the change is easiest to get right. These steps, in this order, cover nearly every homeowner.

1. Read the letter for dates. Find the date of the last instalment TD will pay and whether a refund is coming. Keep the letter with your mortgage documents.
2. Find your roll number. Every property has an assessment roll number, printed on your tax bill and your assessment notice. You need it to deal with the municipality.
3. Look up your municipal tax account. Most municipalities offer an account lookup. Check what has been paid this year and what is still owing.
4. Make sure bills come to you. When a lender pays, the municipality may have sent bills or copies to the lender. Confirm the city has your mailing address so the next bill reaches you.
5. Choose how to pay. Enrol in the municipality's pre-authorized plan, pay through your bank's bill payment service using the roll number, or pay each bill in full.
6. Send proof if TD asks. If your letter asks for evidence of payment, a municipal receipt or account statement is the natural document.

Two traps catch people here. The first is the overlap: if TD paid an instalment the same week you enrol in a pre-authorized plan, the city may collect twice. Check the account before your first withdrawal. If that happens, ask the city how the overpayment will be applied; either way it is cash you did not intend to spend.

The second trap is assuming the city knows. TD's letter goes to you, not necessarily to the municipality. The tax office may still have the bank listed as the payer, so its next bill may go to the lender or may be addressed in a way you overlook. Confirm your mailing address or set up paperless billing with the municipality in the first month.

If you own the home through a corporation or hold it as a rental, add one more step: tell whoever keeps your books. The tax payments now come out of a different account, and they need to be recorded against the property. Our bookkeeping service sets this up so the payments are captured as they happen.

Many municipalities offer a pre-authorized payment plan that takes property taxes straight from your bank account on fixed dates. For a homeowner leaving a lender's tax account, it is the closest replacement: the bill is spread out, the payments are automatic, and the money goes straight to the city with no bank in the middle.

The City of Toronto's 2026 Pre-Authorized Tax Payment program shows how these plans work. Toronto issues two bills a year, an interim bill mailed in January and a final bill mailed in May, and offers three schedules for paying them.

Toronto lets owners enrol at any time, provided the property's taxes are in good standing. Enrolment can be done through the City's property tax lookup, using the roll number and customer number from the bill, or with a paper form and a void cheque. If a pre-authorized payment does not clear, the City charges an administrative fee plus penalty and interest, and removes the account from the program until the owner enrols again.

Other municipalities run similar programs under their own names. Drayton Valley calls its plan TIPP, a tax instalment payment plan, with withdrawals on the first business day of each month. Many cities offer a monthly option close to a mortgage-style rhythm. Check your own municipality's website or call its tax office; the dates and enrolment cut-offs are local.

The eleven-instalment schedule is usually the best fit for a former TD tax-account customer, because it replaces the monthly amount that used to ride along with the mortgage payment. If you join mid-year, your first withdrawals will be larger, because the plan has fewer months left to collect what is owing.

If you prefer not to join a municipal plan, the alternative is to save for the bill yourself. Divide last year's total tax by twelve, add a margin for increases, and move that amount into a separate savings account on the day your mortgage payment comes out. When each instalment falls due, pay it from that account through your bank's bill payment service using your roll number.

The margin matters. Property tax bills change every year with the municipal budget and, from time to time, with reassessment. A lender running a tax account absorbed some of that by adjusting your payment once a year; now you see the increase directly. The interim bill is usually based on part of the previous year's tax, and the final bill brings the year to its full amount, so the final bill is where increases show up.

Using the earlier figures, a homeowner with a $4,800 bill for 2026 who sets aside $425 a month would hold $5,100 by year end: enough for the bill plus a small buffer for next year's increase. If the 2027 tax comes in at $5,000, the buffer has already done its job. Interest earned on the set-aside account is taxable income in the year earned, so use a tax-free savings account if you have room and want to keep it simple.

Self-managing has one real advantage over the city plan: you decide the timing. Paying each bill in full on its due date keeps the cash in your account as long as possible. The cost is discipline, because nothing stops the savings being spent elsewhere, and a missed date leads to penalties straight away.

For most households the municipal plan is the lower-risk choice, because it removes the step most likely to fail: remembering. Business owners whose household budget runs through a company, and people with uneven income such as commission earners or seasonal workers, can benefit from reviewing the whole year's cash flow with us. A tax planning review puts property taxes, income tax instalments and other fixed bills on one calendar.

A late property tax payment costs money from the day after it is due. Municipalities charge penalties and interest on overdue taxes under their own bylaws, within limits that provincial law sets, and the charges keep accruing until the arrears are cleared. The rate and how it is applied vary by municipality, so check your bill or the city's website rather than assuming.

The penalty is the smaller risk. Property tax arrears are attached to the property, not just to the owner, and a municipality that is not paid for long enough can start a formal process that ends in a tax sale. That takes a long period of non-payment and formal notice, but it is the reason lenders care so much about taxes being current.

Which brings in the mortgage. A mortgage commonly requires the borrower to keep property taxes paid, and TD's letters have asked some borrowers to send proof of payment. Falling behind on taxes can therefore become a problem with your lender as well as with your city, even if every mortgage payment is on time. The lender may be entitled to pay the arrears itself and add them to what you owe.

Pre-authorized plans bring a risk of their own: the failed withdrawal. In Toronto, a payment that does not clear triggers an administrative fee plus penalty and interest, and the account is removed from the plan. The owner must enrol again, and in the meantime the next instalment will not be collected automatically. A homeowner who changes banks or closes an account without updating the city can end up behind without noticing.

If you have missed a payment, pay it as soon as you notice and then ask the municipality what has been charged. Many cities have a process for requesting that a penalty be reviewed in specific circumstances, such as an error in their own billing. They are much less flexible when the owner simply forgot, so a quick fix is the best defence.

Who pays the bill does not change how property taxes are treated for income tax, but it does change where the paperwork comes from. For a landlord this matters, because property taxes on a rental are a deductible expense. The CRA's rental income guide puts them on line 9180 of Form T776, and you can deduct property taxes you incurred for the rental property for the period it was available for rent.

When a lender paid, the evidence was the mortgage statement's tax account summary. Now it is the municipal bill and your own payment records. Keep both, because the deduction is for the tax incurred for the period, and a landlord who records only what left the bank account may get the timing wrong at year end.

Where you rent out part of your home, such as a basement apartment, the deduction is split. The CRA's guide says expenses that relate to the whole property, property taxes among them, must be divided between the personal and rented areas. You can split them on a reasonable basis such as square metres or the number of rooms rented. Expenses that relate only to the rented part are fully deductible.

The table sets out how property taxes are treated across the common situations.

Rental bookkeeping is where small errors grow into large ones, because the same property tax payment can easily be recorded twice: once from the bank feed and once from the bill. Our guide to real estate bookkeeping covers how to set up the records so each bill is captured exactly once.

Two more groups need property tax figures for their return. Self-employed people who work from a space in their home can include the business-use share of property taxes in their business-use-of-home expenses on Form T2125, alongside utilities, insurance and maintenance. The share is usually worked out on floor area, and the claim cannot create or increase a business loss; any excess carries forward.

Employees are split by how they are paid. Under the CRA's 2025 employment expenses guide, commission employees whose employer signs Form T2200 can claim a reasonable portion of property taxes and home insurance for a qualifying work space. Salaried employees cannot deduct property taxes at all, even when they meet every other work-space test. Mortgage interest and principal are not deductible for either group.

In Ontario, property tax paid on your principal residence also matters for the Ontario energy and property tax credit, which is part of the Ontario Trillium Benefit and is claimed through the ON-BEN application filed with your return. The credit uses the property tax paid for the home, so a homeowner who now pays the city directly should use the amount actually paid for the year, taken from municipal records rather than a mortgage statement. Our post on the income limit for the Ontario property tax credit explains how the credit is worked out.

Owners of a business that runs out of a home they own through a corporation face a separate question: who owns the property and who pays the tax determine whether any of it is a corporate expense. That is not something to settle from a mortgage letter. If it applies to you, our small business accounting team will look at the ownership and the agreements before anything is claimed.

For all of these, the change to direct payment is a small administrative gain. The municipal tax account shows exactly what was billed and paid for each year, which is the evidence the CRA expects to see if it ever asks about a home office or rental claim.

Paying your own property taxes means keeping your own record of them. Save each year's interim and final bills, the payment confirmations or plan statement, and any reassessment notices. Where the tax supports a claim on your return, such as a rental, a home office or the Ontario credit, keep the records for six years from the end of the last tax year they relate to.

Mortgage renewal is the natural moment to look at the arrangement again. If you move a TD mortgage to another lender at renewal, ask whether the new lender offers or requires a property tax account, and what it charges or pays on any balance. Some homeowners value the convenience; others prefer the control of a municipal plan. Either works, provided you know which one you have.

Selling or buying a home also touches property taxes. On closing, taxes are normally adjusted between buyer and seller so each pays for their own share of the year, and the statement of adjustments shows how. When you paid the city directly, check that the instalments you paid line up with the adjustment, because an instalment taken after closing may need to be cancelled or refunded.

Finally, keep TD's letter. If a question comes up later about why a payment was missed, or when the bank stopped paying, the letter fixes the date the responsibility moved to you. It is a one-page document that can settle an argument with a lender or a city.

Homeowners in the Toronto area who want a second pair of eyes can book time with our Toronto tax accountants, and Alberta owners affected the same way can reach our Edmonton tax accountants. Our earlier piece on property taxes in Toronto's downtown core covers how the bill itself is calculated.

For most homeowners, the TD change takes an afternoon to handle: read the letter, check the municipal account, set the refund aside, and enrol in the city's instalment plan or set up your own savings. The cost of skipping it is a penalty notice, and possibly a question from your lender.

Where property taxes reach your tax return, a little more care pays off. Landlords, self-employed people working from home, commission employees and Ontario residents claiming the Trillium Benefit all now take their figures from municipal records, and each has its own rules on what share is claimable. Our professional tax accountants will reconcile the bills and payments and claim the right share in the right place. Personal returns are quoted at a fixed fee before work starts, as set out on our personal tax return pricing page, and you pay after the service.

Call +1 (416) 619-0068 or tell us about your property tax situation and we will explain what we need and what the fee will be.