Every time you own land, you will have to pay taxes on it. Whether it is a commercial property or a residential property, there is still a tax to pay, whether it is for a town, village, city, county, or state. Most residential private property taxes are handled at the local level and do not exceed those of the county. Depending on the nature of the business, it may be handled by a variety of entities, including state and federal agencies. Each specific area and state has its own way of collecting property taxes.
This article is intended for beginner real estate and will focus on property taxes as they relate to residential private property. Your Credit Union financial advisor can also provide you with a wealth of valuable information; Call today to schedule your free consultation.
How property taxes are used. Each locality uses the revenue earned from property taxes for different purposes. It can be anything from road repairs and utility maintenance to firefighter salaries and emergency response. However, most areas use the money received from property taxes for school districts. Taxes are collected and then distributed to schools in a district based on the amount of money received from property taxes. This often puts homeowners in a bind, as most of them want a quality education for their children, but are reluctant to vote to pass measures that would result in a property tax increase.
How property taxes are determined. Before buying a home, it’s important for real estate beginners to understand how the amount you pay in property taxes is decided. Everyone pays a different amount, depending on how much the house is worth. The tax rate for an area is the same throughout that area, but because of fluctuating home values, the property tax you pay may be a little higher or lower than your neighbors.
If the property tax rate in your area is 9 percent, and your home is assessed at $250,000, your annual property tax would be $22,500. If your neighbor’s house was only appraised at $235,000, he or she would pay $21,150 in taxes per year. Many areas have specific time periods required for a reassessment. Most places require a reassessment every five to seven years. This means your taxes could go up or down as the value of your property changes.
What goes into a property appraisal? There are some guidelines appraisers use to determine the value of your home. By becoming familiar with these, you will be more likely to understand why your home has been given a certain value. These are the most common benchmarks that are taken into account when determining a home’s value.
o Selling price of similar properties in the area: The appraiser will know what other homes in your immediate area are selling for and will appraise your home to reflect the value of the neighborhood.
o Historical Property Value – Property value records over the years will help the appraiser determine if the home’s value is keeping up with current trends and if the home is increasing in value over time as a general rule of thumb .
o Replacement cost of the property: it is possible to determine how much the materials would cost to replace the property, or add improvements to increase its value. This may figure in the value of the property.
o Potential value of the property if used to make money – Many people use their property as income through rental or sale, and this value can be used to help the appraiser decide how much your property should be valued.
Dispute an assessment. Because home values are subjective, it is possible to dispute a value. You can talk to neighbors and real estate agents to find out what homes in the area are appraising for. Recent home buyers and sellers can give you a good idea of what others are paying in property taxes. Visit your tax board or local tax assessment office to find out the procedures for challenging an assessment you believe to be unfair.
Pay your property taxes. As a newcomer to real estate, you want to be sure that you are paying the taxes on your property. There are several ways to do this, including paying the tax commission quarterly or annually. However, the easiest way to pay your taxes is to have them integrated into your mortgage loan. They can be added to your monthly mortgage payment, making it a relatively easy way to make sure everything is taken care of.
With a little experience, even a real estate novice can get a good handle on what it takes to get a fair value appraisal and learn the ins and outs of paying property taxes.