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Property Tax

Property Tax

Americans pay a number of taxes regularly. These include federal and state income taxes, sales tax in most states, excise taxes, estate taxes, and property taxes. Understanding how property taxes work can help you make good property buying and selling decisions, including home purchases. It can also allow you to stay on top of your property tax obligations, and understand how your property taxes are used to maintain and better your community.

What is property tax?

Owning a property, whether it is residential or commercial, real estate or other, has a tax implication. Property owners need to pay property tax to their cities or towns, or states. This is basically dues paid that are tied to property you own, and part of the cost of living. Property taxes should be considered when property buying decisions are made as they become part of the monthly property payment, along with mortgage and homeowner’s insurance.

How are property taxes calculated?

How are property taxes calculated?

Property taxes can vary widely across different areas, as well as commercial versus residential properties. Each city and town has a tax rate. This is a percentage that is determined by the city or town government, and often involves a vote. The current state percentage averages range between .27% and 2.47%, with Hawaii being the lowest and New Jersey the highest. There are jurisdictions in all 50 states and the District of Columbia that impose property taxes. Most property tax revenue comes from local county, municipal, township, school district, and special district jurisdictions. Some states also tax personal property, like machineryand motor vehicles.

To calculate the amount of tax you could expect to pay for your property, you will need to know the jurisdiction’s tax rate for your property type, as well as the appraisal value of your property. Real estate property is appraised annually by the town’s assessor’s office. You can request an additional appraisal for a fee, which is done every time the property changes ownership or is refinanced.

The appraised amount will change based on real estate market fluctuations, improvements you make to the property and other economic and property-specific factors.

Who is in charge of collecting property taxes?

Town or city offices collect property taxes, such as the assessor’s department. These are sometimes billed directly to the owners, or through the mortgage lender. In the latter case, a lender will charge extra money monthly and put it in an escrow account, issuing a quarterly tax payment as required by the municipal department in question.

What happens if you default on your property tax payments?

What happens if you default on your property tax payments?

Your property taxes are as important as other taxes you pay. Failure to make payments will result in the municipal office taking steps to try and force you to pay. The most common recourse is for a lien to be put on your property, restricting you from selling or refinancing the property. In some cases, towns may sell liens to investors, who then will try to take legal steps to collect from the property owner.

What do your property taxes pay for?

You may be wondering what exactly your property tax dollars support. If the property is a home, it is likely that your property tax is paying for public schools in your town, public works like street cleaning and snow plowing, and other public town establishments, like libraries, community centers, and senior services. Taxes on vehicles can be used to repair roads and bridges, while taxes on boats may help to maintain the public boat docks and any of their workers. All tax spending is public record, and you can request to see documentation that details how your town handles property tax revenue.

How can you find out a town or city’s tax rate?

How can you find out a town or city’s tax rate?

It is very easy to find out how much tax you can expect to pay on a property. Every official real estate listing details the amount of annual tax being charged for the property. You can also contact your city or town hall and inquire about the rate and their property assessment process and schedule.

Tax obligations can seem intimidating, but through doing a little research, you can feel confident navigating purchasing decisions and being able to fulfill your responsibilities as a property owner.

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