Anyone who’s currently looking to buy a home or works as a property developer or investor should take an interest in the property taxes that are currently in place. There are so many variations depending on which country you live in, and even the local government restrictions and rules within each country.
There are also lots of things you can do to minimise your property tax bill and hidden issues you need to be aware of. In recent years, we’ve started to see rises in property taxes, and that’s something that’s happening all around the world right now. Read on now to find out all about this and much more.
The Nations With the Highest Property Taxes
Property owners in the UK now pay more property tax as a percentage of the country’s GDP than any other country on the face of the earth. Last year, property tax amounted to £80bn. This is up 1% on 2011, and although that might not seem like a big jump, when we’re talking about figures of this size, it is.
10.7% of all taxes paid in Australia are property taxes. There are only a few countries in a world that pay more than 10% of their taxes in the form or property taxes, and Australia is one of them. It’s still less than the United Kingdom and a few other nations, but still a lot. There’s also a 5% state tax for property buyers in Australia.
In Canada, local provinces get the majority of their money from property taxes, so they’re not inclined to lower them. This is what’s behind recent rises, and they’ve resulted in 11.8% of all taxes paid in Canada being property taxes.
The most important recent development regarding property taxes in the United States is the tax bill that was recently passed through government. It will introduce a cap property tax deductions, making it harder for people to pay less property tax. It could also make taking out home loans more difficult for people.
2017 saw the South Korean government take steps to cool down the property market. Capital gains taxes on owners of multiple properties have been raised. The aim is to crackdown on property speculators, though many people will be impacted by the new legislation.
Another country looking to clampdown on property speculators is New Zealand. It means that people have to hold onto their property for longer if they want to avoid paying extra taxes on the property, and you can learn more about that at the bottom of this page.
What Makes Property Taxes Rise?
Where You Live
Different cities have different property tax rules, so where you live will have an impact on how much property tax you pay. If you are thinking of moving to a new city or investing there, you should definitely factor this issue into your property hunting plans. By moving, you can either end up paying more or less property tax.
Improvements in the Local Property Market
The area around you can be impacted by ups and downs in the property market. If a lot of homes start to sell for higher than usual prices in your immediate area, you tend to see property taxes rising too. Of course, that’s not something you have much control over, but it’s useful to know it anyway.
Local Government Decisions
It’s not just the central government that can create laws and rules relating the taxes levied on properties. It’s also possible for local governments and rule-makers to increase taxes. If they decide to use these powers and put property taxes up, that’s something homeowners simply have to accept and deal with.
Big Home Improvements
Your home can be reassessed if you make improvements to your home. An extension or any other major work to the home will trigger this reassessment. It’s something that you should be aware of before you begin any major work or extension building plans. After the reassessment, your taxes could potentially be bumped up.
Minimising Your Property Tax Bill
Make Use of the Tax Exemptions You’re Entitled To
There are many different tax breaks and tax exemptions that you can take advantage of as a homeowner, and you shouldn’t ignore these. They can save you quite a lot of money, depending on where you’re located. Exemptions for seniors are available, as are exemptions for properties that are your primary residence.
If you have an assessment and your property value changes, the taxes on that property can also change. However, you can save money on property taxes if you appeal any changes that are made after an assessment. It’s definitely worth considering this option because it could make a big difference.
Hold the Property for at Least a Year
You can get yourself a 50% tax discount when you sell a home if you first hold onto the home for more than a year. So if you’re an investor, don’t make the mistake of selling the home 10 or 11 months after you purchase the home. It makes sense to wait a little longer to make sure that you get that discount and save big.
What You Should Know About the Bright-Line Rule
The bright-line rule in New Zealand is now changing, and you need to understand why that matters. Previously, a property seller was hit by capital gains tax if they sold the home within two years of buying it. It’s now the case that sellers will have to wait for 5 years before being able to avoid that tax hit. If you’re planning on doing restructuring work and then selling on at a profit, this tax will impact you.
Property prices are rising in many locations right now, but as the information above makes clear, there are things you can do to stay on the ball and keep your property tax bill as low as it can be. Make use of everything you’ve learned and found out about here going forward, whether you’re buying a new home or investing in properties.