What Are Property Taxes

What Are Property Taxes

As a general definition, property taxes are imposed by governments, usually at the state and municipal levels, on real estate owned by individuals. Property taxes have been around for quite some time. Your monthly mortgage payment can be less than your yearly property tax bill in certain parts of the nation. It may be as much as three to four times your mortgage payment in certain areas.

Due to the fact that real estate taxes vary widely from one place to the next, it’s important to include them in while picking a new home. You’ll need to make place in your budget to pay the expensive property taxes in locations with exceptional facilities, such as good schools and public programs. Property taxes are crucial to the funding of state and municipal governments. They generate the bulk of the money used to support the county’s infrastructure, police force, and public schools.


What’s The Difference Between Property Taxes And Real Estate Taxes?

Property taxes and real estate taxes are interchangeable terms. Property taxes are classified as real estate taxes by the Internal Revenue Service (IRS), though they are same in principle. This revenue is used by the government to provide essential services to the public.


How Do Property Taxes Work?

Before we get into the specifics of how property taxes operate, let’s establish a few crucial concepts. First, you must get acquainted with the term “assessment ratio.” The assessment ratio is the ratio of the house value established by an official appraisal (often conducted by a county assessor) to the market value. If your house has an assessed value of $200,000 and a market value of $250,000, the assessment ratio is 80% (200,000/250,000). The assessed value of your property for tax purposes is equal to the market value of your house multiplied by the assessment ratio in your region.

How does the county assessor determine the value of your home? Again, this may vary from county to county, but an assessment may be done annually, every five years, or anywhere in between. This method has the potential to become complex.

Your home’s assessed value may be the same as its actual market value in certain states. The assessor finds this out by looking at the prices of recently sold houses that are comparable to yours. It’s possible that your property’s assessed value is much lower than the market value in other states by several thousand dollars. You may get additional information about the property tax system in your area by contacting your county government, either in person or via their website.

Let’s move on to another prevalent property tax term: “millage rates.” The millage rate is the amount of tax imposed per $1,000 of property value. Millage is measured in tenths of a penny. One mill equals $0.001. A millage rate of $0.003 on a $300,000 house, for example, will result in $900 in taxes owed ($0.003 x $300,000 assessed value = $900).

Take your assessed value and deduct any exemptions for which you are entitled to determine the taxable value of your property. The taxable value is multiplied by the total of any millage rates that apply.

Man with miniature house between his hands.

Deduct Any Exemptions You Qualify For

Certain demographics are usually excused from paying property taxes in most locations. The exemptions are an effort to help homeowners pay their property taxes. In rare circumstances, it may even be possible to remove property taxes entirely.

The following are the most popular property tax exemptions; however, you should check with your local government to see what options you have.


Homestead Exemption

Most localities provide a homestead exemption or a tax break if you live on the property full-time. If you utilize the house as a vacation or investment property, you will not be eligible for this exemption.


Senior Citizen Exemption

Many communities provide a senior citizen exemption, which either reduces or freezes real estate taxes at a certain rate. To qualify, you must be a certain age and reside in the home full-time. This is particularly useful if you are on a fixed income.


Religious Exemptions

Your property may be excluded from real estate taxes if it is a church, religious, or charitable organization.


Exemptions for Homeowners with Disabilities

If you are a handicapped homeowner (veteran or not), you may be qualified for an exemption that lowers or eliminates your tax payment. Depending on the degree of your handicap, each government has distinct laws and exemptions.

How To Pay Property Tax

Property tax payment procedures might vary depending on where you live. On a monthly basis, some homeowners pay more than the minimum required by their mortgage. That sum is held in escrow by the lender until it is time to make a mandatory payment to the government on the homeowner’s behalf.

An escrow account is a separate account established with your mortgage lender or servicer. Property tax payments for the next year will be calculated by your servicer and divided into 12 equal installments, which will be added to your monthly mortgage payment. Your lender will keep that money in an escrow account and pay your taxes on your behalf.

Other people make yearly, quarterly, semiannual, or monthly payments directly to the county government on their property tax bill. How often you must make tax payments is determined by the method used by your county.


What If I Disagree With My Property Tax Bill?

You may file an appeal against your property tax bill if you disagree with the amount. However, you may only appeal the assessed value or a denied exemption. You won’t be able to negotiate the mill rates. They are the same throughout the area.

Appeals processes vary greatly depending on where you are. Some jurisdictions only accept appeals in writing, while others insist on a personal appearance. Many of them also have deadlines by which appeals must be submitted. To learn the specifics of the processes in your region, visit the webpage for your local municipality.


What If I Don’t Pay My Real Estate Taxes?

Property taxes, like income taxes, are non-negotiable, which means they must be paid. If you don’t, you might face mortgage liens or foreclosure.

A mortgage lien is a claim on your property until you pay your liability, in this example, property taxes. If you fail to pay your taxes, the county may levy a lien on your property. This implies that unless you satisfied the lien before selling the house, they have first claim to the money when you sell it.

If you wait too long to pay past-due taxes, a mortgage debt might become a foreclosure. In a foreclosure, you lose your house to the county, which takes the share of the taxes owing to them.

Let Us Help You Work With The Property Taxes Linked To Your Mortgage