Deducting Your Property Taxes
The state and local tax deduction allows taxpayers to deduct their property taxes on their federal tax returns, as well as their state income taxes or their sales taxes . The Tax Cuts and Jobs Act passed in 2017 limited the SALT deduction to $10,000. Before the 2018 tax year, the SALT deduction had no cap and all state and local taxes were deductible.
You have to itemize your tax deductions to take the SALT. Just taking the standard deduction on your tax return may be quick and easy, but sometimes, itemizing deductions can get you a bigger tax refund, especially if you live in a state with high property taxes. You may need to have a tax professional run both calculations to see which offers the biggest benefit.
Where The Property Tax Goes
School districts are the largest users of the property tax. In fiscal years ending in 2009, local governments and school districts outside of New York City levied $28.87 billion in property taxes. Of that, 62 percent was levied by schools and 17 percent by counties. The remaining 21 percent was divided among towns, special districts, cities and villages.
When Are Property Taxes Due
The date by which property taxes are due varies based on the location of your property. It falls on the taxpayer to obtain their tax bill and make payments on time. You can find out your property tax due dates by checking your local tax assessors website.
For example, the San Diego County tax collection website provides a schedule for installment payments. The first installment is due November 1 and is late after December 10. The second installment is due February 1 and is late after April 10. This shows that taxpayers are given an ample window of time to make either installment payment. They also have the option of paying both installments when the first one is due.
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Real Estate Taxes & Property Taxes: Whats The Difference
One of the least exciting parts of being a homeowner is paying taxes on the property you own. Groaning about that tax bill is practically a rite of passage after you buy a home! But if youve ever complained about paying property taxes on your house, youve made the common mistake of assuming property taxes and real estate taxes are one and the same. After all, your house is your property, right? But in reality, theres a difference between the two. More specifically, real estate taxes apply to what the government calls real property, which is non-movable. And property taxes apply to movable property, such as vehicles and furniture. Heres what else you should know about these two types of taxes.
How Do You Pay Property Taxes
You can pay property taxes directly to your local tax authority, but you will want to confirm accepted forms of payment.
You can also add them to your monthly mortgage payments after youve bought a home. Its easier for some people to pay their property taxes this way because it means they dont owe a big lump sum once a year. Since it is separate from your mortgage payment, the property tax money is placed in an escrow account and sent to your local tax authority on your behalf when the bill is due. A mortgage lender also might require a borrower to pay their taxes this way.
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Staying Aware Of Property Taxes
Once you have a strong understanding of property taxes, from how they are calculated to their purpose, the best way to ensure that you are paying the right amount is by staying educated. This means staying up to date with your municipalities changing rates and spending from year to year, finding out about any deductions you might be eligible for and having an active role in the assessment of your property.
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Difference Between Real Estate Taxes & Property Taxes
The terms real estate taxes and property taxes are often used interchangeably, and thats correct to a certain degree. However, technically speaking property taxes include both real estate property and personal property. Real estate taxes are taxes assessed explicitly on the value of residential or commercial property. For example, real estate taxes might include taxes levied on a condo, house, or apartment building. Property taxes would include these, along with taxes on personal property such as boats, cars, or other vehicles.
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Is Real Estate Tax The Same As Property Tax
While real estate tax and property tax may sound like the same things, there are some distinctions. At a high level, real estate taxes are a group of various types of taxes imposed on real estate. Property tax happens to be one of those types. Lets look at the various taxes that compose real estate taxes.
Property Tax System Basics
Translation:
Property taxes are local taxes that provide the largest source of money local governments use to pay for schools, streets, roads, police, fire protection and many other services. Texas law establishes the process followed by local officials in determining the value for property, ensuring that values are equal and uniform, setting tax rates and collecting taxes.
Texas has no state property tax. The Texas Constitution and statutory law authorizes local governments to collect the tax. The state does not set tax rates, collect taxes or settle disputes between you and your local governments.
Your local property tax system has several main components.
The property owner, whether residential or business, is responsible for paying taxes and has a reasonable expectation that the taxing process will be fairly administered. The property owner is also referred to as the taxpayer.
An appraisal district in each county, administered by a chief appraiser, appraises the value of your property each year. The appraisal district’s board of directors hires the chief appraiser. Local taxing units elect the board directors and fund the appraisal district based on the amount of taxes levied in each taxing unit. For more information about your local appraisal process, please contact your county’s appraisal district. The appraisal district can answer questions about exemptions and how your appraised value was determined.
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What’s The Difference Between Real Estate Tax Property Tax And Personal Property Tax
Real estate tax and property tax are the same thing. The IRS uses the term “real estate tax,” but most people call it “property tax.”
Property tax is charged on immovable propertyland and structures that are permanently attached to the ground such as a house, building, or land. If you own a home, you pay property tax directly to your local tax assessor or indirectly with your monthly mortgage payment.
On the other hand, personal property tax is an annual tax imposed on movable assetsmobile homes, RVs, vehicles, boats, planes, etc. The portion of your vehicle’s registration or license fee that’s based on the value of the vehicle is considered a personal property tax.
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How Are Property Taxes Determined
Personal property taxes are calculated based on the depreciated value of the asset. Typically, the local tax assessor creates a baseline value based on the amount paid for the personal property. The assessed value usually declines each year due to expected wear and tear.
Each state treats personal property taxes differently. For vehicles, most owners pay the taxes when they renew their tags. When you pay these annual vehicle registration or license fees, the portion that is based on the value of the vehicle is the personal property tax.
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Is A Vehicle Considered Real Property
Vehicles are considered real property when they are attached to the ground, like a mobile home anchored using steel straps. In this case, the property is immovable and real estate taxes are paid.
However, if a vehicle is not attached to the ground like the car you use to drive to work it is not considered real property. Movable vehicles are considered personal property and are taxed as such. This includes mobile homes that are unattached to the land.
Property taxes may feel like a burden, but theyre an important part of our communities. Without these funds, key community features like schools or libraries could suffer. With that said, there are still ways to lower property taxes while still maintaining good citizenship.
Wondering how else you may be able to lower your monthly mortgage payment? Take a look at todays rates and see if refinancing could be right for you.
Deduct Any Exemptions You Qualify For
Most areas offer property tax exemptions to certain demographics. The exemptions are an attempt to make it easier for homeowners to afford their property taxes. In some cases, it may even eliminate property taxes altogether.
Here are the most common property tax exemptions, but check with your local government to see what options you have.
Homestead Exemption
Most areas offer a homestead exemption or a discount for living in the property full-time. You wont qualify for this exemption if you use the home as a vacation or investment home.
Senior Citizen Exemption
Many areas offer a senior citizen exemption which either discounts real estate taxes or freezes them at a specific rate. To qualify, you usually have to be of a particular age and live in the property full-time. This can be especially helpful if youre on a fixed income.
Religious Exemptions
If your property is a church, religious or charitable institution, it may be exempt from real estate taxes.
Exemptions for Homeowners with Disabilities
If youre a disabled homeowner , you may be eligible for an exemption that either reduces your tax liability or eliminates it. Every government has different rules and different exemptions based on the severity of your disability.
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Why Are Real Estate Taxes & Property Taxes Separate
Real estate and property taxes are separate in how they are calculated and how much is owed. Real estate taxes are based on the propertys value, and therefore tend to be much higher than personal property taxes. Personal property taxes, such as car registrations, are typically flat costs determined by the type of asset. For example, in Colorado, a passenger car can be registered for $75. A single-family home valued at $500,000 in Colorado would owe roughly $2,600 in real estate property taxes.
This difference becomes important during tax season, as property taxes can count as deductions. If you pay a significant amount in real estate property taxes, this can significantly impact your total amount owed.
Differentiate Between Short And Long
As you prepare for tax season, start by separating your short and long-term investments. Short-term investments are those youve held for one year or less, while long term is anything over that time period. For example, wholesaling, prehabbing, and flipping typically fall under short-term investments, while buy-and-hold properties are typically long-term. The difference will be important in determining the tax rates on each investment. Ask your CPA to help you figure out which entity structures are right for you and your investments.
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How Are Property Taxes Paid After I Pay Off My House
Theres nothing more freeing than making your final mortgage payment, walking out to the backyard of your completely paid-off home, and feeling the grass beneath your feet. It just feels different.
No more monthly house payments for you! But does that mean youre also finished with property taxes?
We hate to be the bearers of bad news, but you have to pay property taxes forever.
The difference is how you pay your property taxesand when you pay your property taxes.
Once you pay off your house, your property taxes arent included in your mortgage anymore, because you dont have one. Now its on you to pay property taxes directly to your local government.
How often you pay property taxes depends on where you live. Your local government may want you to pay your property taxes in a lump sum once a year. Or they may break it into smaller payments that are spaced a few months apart.
The exact day when you have to pay your property taxes also depends on where you live, so make sure you pay close attention to the due date on your property tax bill when it arrives in the mail!
And dont think you can just skip a payment here and there, either. If you get behind on paying your property taxes or you dont pay them at all, the local government can take your house and sell it to recoup the tax debt you owe them . . . and they can do that even though your house is completely paid for. Dont let it come to that!
The best way to handle property taxes on your own is to plan ahead.
Assessed And Market Values: What They Can Mean For You
While a homes value in the market can rise and fall precipitously, based on local conditions, assessed values are typically not as sensitive to fluctuations.
Some states, like Oregon, prohibit the assessment from being increased by more than 3% a year, even if the market value goes up more, says Nathan Miller, founder of Rentec Direct, a software company that educates property managers and landlords.
Dont be upset as a property owner if your assessment is calculated at a lower amount than youd figured. It doesnt mean your property value is actually less.
Assessed value is used mostly for property tax purposes. A lower assessment means a lower tax bill. Home buyers and sellers, on the other hand, look more to marketplace value than at property tax data.
However, assessed value can come up when you buy or sell a home, because this number, unlike the loosey-goosey market value, is public knowledge contained in property records. So, rising assessed values bode well when home sellers try to justify their sales price to a buyer: Hey, the assessed value is $310,000, and Im only asking $320,000.
Likewise, buyers can use assessed value to justify a lower price: Hey, the assessed value is $260,000, and youre asking for $300,000. What gives?
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What Happens If I Do Not Pay My Real Property Taxes
Your property can be sold at Tax Sale to satisfy your tax liability. You then have the right to redeem your property up to the date the court issues a court order foreclosing your right of redemption and granting the Tax Sale buyer the right to the deed.
To redeem your property, you must pay all taxes, assessments, fees, and costs due and owing to the District of Columbia and legal costs due to the Tax Sale purchaser. Legal fees due and owing to the Tax Sale purchaser should only be paid after the taxes, assessments, fees, and other costs to the District of Columbia have been paid.
Property Taxes And Real Estate Taxes In Canada
Taking that first step on the real estate ladder can mean a steep learning curve when it comes to financial terms and how they affect you. One common area of confusion for those entering into the real estate market is the terms real estate and property taxes, which are often used interchangeably. So the real question is, are real estate taxes and property taxes the same? In short, yes.
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What Is Property Taxes
Property taxes are taxes on items of privately owned property that can be moved about and are not attached to land. Examples of personal property include furniture that is not attached to the property, cars, electronic devices, boats, jewelry, and art. These taxes are assessed by state or local governments. The most common way whereby property taxes are applied is at the point of sale.
Property Taxes Are Based On The Value Of Real Property
The property tax is an ad valorem tax, meaning that it is based on the value of real property. Real property is land and any permanent structures on it.
Without accounting for exemptions, properties of equal value in the same community should pay the same amount in property taxes. The owners of more valuable properties should pay more in taxes than the owner of less valuable properties.
Unlike many states, there is no personal property tax in New York. Rather than taxing items such as jewelry and vehicles, only real property is taxed.
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How Real Estate Taxes Are Determined
Lets say your house has a fair market value of $350,000 and the predetermined percentage in your municipality is 65%, the tax assessment value of your home is $227,500, or $350,000 x 65%.
If your local tax rate is 3%, then you would pay $6,825 in real estate tax per year. If your local tax rate was higher, say 8%, youd pay $18,200 on a similarly valued home in another locale. Location, location, location.
Real Estate Taxes Vs Property Taxes
Most people use the terms real estate taxes and property taxes interchangeably. However, while both terms cover taxes paid on real estate, property taxes include other types of assets as well. Lets compare the differences between real estate tax vs. property tax, break down how theyre calculated and explain when they qualify for a tax deduction.
A financial advisor can help you optimize a tax strategy for your real estate investments and goals.
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