The phrase tells it all. Property tax is the tax that you’re required to pay by the national, county, regional, state government or some other local jurisdiction for owning real estate property. When looking to buy or own property, most people barely consider that property ownership goes beyond mortgage repayments. Paid either monthly or annually, taxes are basically an expense, which should be factored in as part of the cost when buying a home. Having the right and important information about property tax is crucial to every homeowner or property owner. Among other perks, you get to plan better and probably pay less and save a couple of dollars off your tax bill annually if you’re lucky. Without further ado, here are some things you probably didn’t know about property taxes and you should.
Things You Want To Know About Property Taxes
- The types and the fees involved
- How Property Tax is calculated
- Penalties and foreclosure
- Tax exemptions
- Tax breaks
1. Know Your Tax Types and Fees
The tax rates imposed on a property may differ from state to state and county to county or local government to local government. Pretty much the amount you pay for your annual property tax depends on where your property is located and its current value. Some local governments have various types of taxes depending on the kind of property you own, including temporary tangibles. In areas such as Nashville, Tennessee, for instance, you may be required to pay personal property tax in addition to real property tax. Especially before buying a home or real estate property, it is important to visit your local government’s office and ask about the taxes you’re required to pay.
2. How Property Tax Is Calculated
In most areas, a tax assessor conducts an assessment of your property and determines your tax rates based on the property valuation. In some areas where development and expansion are rapid, property tax rates may increase as the property appreciates in value. The general rule of thumb is that the rates are tied to your home or building’s value and its location.
The calculation formula may vary from place to place though. In Boca Raton Florida, for instance, local governments set defined millage rates that they use in the assessment process and every 10 mills are equal to 1%. Your property tax is calculated by multiplying the millage rate with your property’s value. You barely need to cram this formula though. Fortunately, you can find property tax calculators on government websites and other reliable sites online. It is also worth noting that in case you add a structure or building on your property, your annual tax is highly likely to increase since your property value also does.
3. There’re Penalties to Worry About
Paying your property tax is one thing, doing so on time is absolutely another. Note that there are penalties involved for late payment and taxes in arrears. In Florida, for instance, delinquent property taxes attract a 3% interest along with advertising fees. These monies are added to the total due amount. Failing to pay your property taxes can plain and simply lead to foreclosure. You don’t want to lose your home over a few dollars a year.
4. You Can Be a Beneficiary of Tax Exemptions
In some areas, the government offers tax reliefs for certain classes of property owners. People with disabilities and veterans, for instance, are beneficiaries of tax exemptions in most states in the US. In some areas, local tax jurisdictions provide a certain amount of tax relief to homeowners. Florida is a good example where senior citizens aged above 65 are eligible for up to $50,000 homestead exemption and $5000 veteran disability exemption. Since exemptions may vary from jurisdiction to jurisdiction, it is advisable to liaise with your local tax assessor and ask whether you’re eligible.
5. Property Tax Can Lower Your Income Tax
Last but not least, you can get tax deductions, credits, and rebates just by being a homeowner. The next time you file your federal income tax returns, you may want to itemize your property taxes as deductibles. However, special assessment costs are not deductible along with the actual tax. In some instances, paying your property taxes in time can even help you claim for a refund off the amount you paid for federal income tax.
Knowing how property taxes work can actually reduce your home ownership costs depending on your area of residence. It is also good for your budget, especially when it comes to property ownership expenses.
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