Most first-time homeowners realize that along with buying a home will come the responsibility of paying property taxes. Accordingly, it is important to learn more about property taxes. What may come as a surprise is how much property taxes can add up to, requiring many to budget for this expense that can amount to thousands of dollars annually. In most cases, however, property taxes are placed in an escrow account should a mortgage be used in buying the home. Understand more about property taxes and a few ways to reduce property taxes today.
An Overview of Property Taxes
Property tax will be determined on assessed real estate property. It is generally a value that is in proportion to the value of the property. The assessment is generally done by the municipal or local government. In most situations, property taxes will be assessed on land, buildings and immovable improvements. Moveable property is not generally subject to property tax. States and localities will have their own formulas used in the calculation of property taxes.
A potential new home buyer in Mountain’s Edge may want to refer to a copy of the tax bill of a current owner for an estimate of current property taxes on the property. A real estate agent can assist in this request.
However, current owners may have qualified for a lowered property tax and a higher property tax may be assessed after a sale. Upgrades may result in a redetermination of property taxes on a home. Home improvements, such as the addition or remodeling of a bathroom or the installation of central heating, can increase the value of a home and soon be reflected in a home’s property tax after an upcoming assessment. Reassessments can occur when a home is improved, according to a set schedule or be requested.
The Cost of Property Taxes
Homeowners should be aware that property taxes are recurring every year. Determination of the property tax on a home needs to account for multiple factors, such as changing home value. When choosing an area to live in, buyers should be aware of the amount of property taxes that may be expected. Property tax amounts can vary significantly.
Homeowners in New Jersey may be paying the highest rate when it comes to property tax, as well as those owning homes in Illinois, Wisconsin, Connecticut and New Hampshire. Hawaii, a state with the lowest tax property, has a high income tax burden. Retirees or job-seekers who are looking to relocate to areas with lower property taxes may want to factor in how the area may raise funds with other taxes.
Relief from Property Taxes
There are some forms of partial property tax relief that may be offered in general or to specific populations. New buyers may want to explore potential credits, rebates, tax caps and homestead exemptions. One or more of these options may serve to reduce the property tax burden of a property. Seniors and low-income households who want to buy a home or continue to affordably pay property taxes on a home may want to look into tax deferrals, whereby partial or full payment of property tax is expected when a home is sold.
Reductions on Property Tax
New and current homeowners may be able to have their property assessed to potentially cut or lower property tax payments. Individuals living in locations where communities have seen a decrease in home values may want to request a tax assessment. There is a relatively short appeal window to do so and specific requirements may be attached to sending the appeal application.
One argument that can be used when appealing a tax assessment is that the comparables used in the tax assessment were not correct and there is a difference of at least 10 percent between the specified home and relevant comparables. Additional discrepancies may be discovered by homeowners who get a copy of their property tax card.
Property Taxes in the First Year
A question new home buyers often ask is; does the buyer or seller pay for the property taxes of a home the year it is sold? New homeowners may need to pay only part of the year from the point at which they become the current owner. If the seller has paid the property taxes for the full year, the buyer may need to reimburse the seller for a prorated share. When taxes have not been paid, the seller pays his prorated share and it is placed into escrow. How the property tax will be paid is clarified in the home sale contract.
New homeowners may also appreciate the advantages of paying a mortgage and property taxes, such as mortgage interest and mortgage points. Both the buyer and seller may claim deductions for taxes that year. Speak with a trusted agent to learn more about property taxes on a specific property.