Real Estate Property Taxes
In the US, property taxes collected is one of the major sources of revenue for the local government. These taxes can subsidize programs and public services like law enforcement, road fixes and maintenance of public buildings like schools. It can also be used to fund local courts, libraries, parks, civics centers and other community programs.
Property tax is collected on an individual’s real or personal property, which is why it can be called realty tax. Aside from property, like real estate, it can be collected from possessions like vehicles, boats, motorcycles, campers, etc. Taxing personal property may not be present on all states.
The property is assessed and the tax is calculated based on the market value of the property or the real estate. Its market value will be multiplied with the current tax rate. The tax rate depends on the tax levy of the community. To determine the tax levy, the local government would first determine the sources of income, aside from property tax. Once the budget is already determined, the revenues from other sources will be deducted from the budget. The remaining amount would be the tax levy.
Unlike income tax, it does not naturally progress, it is be based on how much the property is worth. The property tax will be based on its purchase amount. If there are major property improvements that could significantly affect its market value, then the property would be reassessed which may increase the taxable value of the property.
Aside from major renovations, the value of your property could also change based on the market value of other properties in your community. It could change base on the value of the property if it is rented out or sold. The historical value of the property could also be a reason for an increase in value.
According to Tax Foundations 2005-2007 data, New York counties have the top real estate taxes, ranging from 2.84% (Monroe) to 3.05% (Orleans). The areas with the lowest tax rate are in Louisiana, ranging from 0.145% (St. James Parish) to 0.122% (St. John the Baptist Parish). If you house worth $400,000 and the tax rate in your area is about 2.75%, then your property tax would be $11,000.
The real estate tax or property tax could be paid annually. In some cases, it could be divided into installments or quarterly payments. This is common for commercial properties. Homeowners would often pay their property tax through monthly installments, in addition with their mortgage.
Aside from the fact that homeowners should know how much tax they are paying every month, for house hunters, it is important to have an idea about property tax rates in the area where you are planning to move. After all, you will be paying them on top of your mortgage in exchange of quality public service from the state government.
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