10 Things to Know About Property Taxes
You might have the basic knowledge of how property taxes work but find out how they work with these 10 things to know about property taxes. A deeper knowledge of property taxes can save you money as you purchase or sell a home.
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Be Aware of the Different Taxes you Might Have to Pay
Taxes can run in the thousands for homeowners and are typically due twice a year. Escrow accounts can help by making 1/12th of the estimated cost each month but keep an eye on the escrow account statement because sometimes loan servicers fail to pay on time and pass the incurred fees onto the homeowner, according to the U.S. Department of Housing and Urban Development. Some cities assess specific fees like street cleaning. Also, there might be special assessments coming up for street projects. Find out if there are multiple taxing authorities, some towns have watershed districts that collect tax money. Check these tips on how increase your home value.
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Tax Assessor Calculates Property Tax
A tax assessor attaches a property value to your home and makes adjustments based on local rules to determine the assessed value. Property tax is determined by multiplying the assessed, taxable property value by the mill rate (the mill rate is a figure the represents the amount per $1,000 of the assessed value of property) and then dividing that number by 1,000. If the mill rate is 7 percent and a residence has a taxable value of $150,000, then the tax bill would be $1,050. Fortunately there are government websites that can calculate your tax rate based on its estimated property value.
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Pay Attention to Assessments and Reassessments
Find out if the home will be reassessed upon sale, when the next reassessment will occur, if exemptions apply or if there is tax relief available. The assessor compares your property to similar properties that have sold in the area and make adjustments based on variables that make your property more or less valuable. If you're making your first home purchase, take a look at these tips on buying a home.
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Keep up on What Local Government is Deciding for Levies
Every year local governments set tax levy rates typically toward the end of the year. Pay attention to the rate they set and the impact it will have on homeowners. Several states are required to hold truth in taxation meetings where an explanation of the tax rate is given. Governments almost always provide the estimated tax impact on a home of a certain value. Keep close tabs on any proposed additional taxing powers a local government adds, like a watershed district or a stormwater fee. Save money around the house to pay for taxes with these easy hints.
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Pay Your Taxes on Time
Property taxes not paid on time are subject to interest and payments that can result in the government placing a lien on your home. If you sell your home and it has a lien on it, any proceeds from the sale of the home go toward the unpaid property taxes. If your property taxes are getting out of hand, find out if it's time to move.
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Keep Tabs on Upcoming Issues in the Community
Local governments use property taxes to fund schools and public services like police, fire and libraries. Is there a referendum coming up for the school district? If it’s passed, it’ll raise your taxes. Is the police department trying to finance building a new police station? That means homeowners will have to pick up some of the costs. Is the state adding funding for local governments and counties or is it decreasing? Either way means local governments will adjust their tax rate based on how much they’ll receive from the state. Follow these guidelines for advice on buying a house.
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You Can Deduct Property Taxes from Your Federal Income Taxes
You can itemize deductions on your federal income tax return and deduct the amount you paid in property taxes. You just can’t deduct the cost of special assessments. If you pay property taxes with an escrow account you can deduct only the amount that went to the government, not the total of what you paid into the account. Also, check out tax credits and tax deductions for energy efficient appliances.
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You Can Appeal Your Assessment or Property Value
If you plan on appealing your property tax assessment, take a look at comparable properties in the same tax classification. Find homes that are about the same age, size and similar amenities that are paying less in taxes. Also, pay attention to the timeframe in which you can appeal your assessment. You can usually find this information on a county’s assessor’s website. Meet your potential neighbors as you search for a new home to help you get a feel for your tax assessment.
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Be Aware of how Taxes Were Calculated for Previous Homeowner
When the property taxes are listed on a home that might not include all the information you need. The previous owner may have had an exemption you’re not aware of at the time of the purchase. Or, it might take some time for your exemptions to show up on your escrow. Find out if solar energy can save you money with tax deductions and credits.
Originally Published: February 06, 2018