If you’re like most new homeowners, you were probably overwhelmed with all the new information about owning a house. One of those things is likely property taxes.
Now that you own personal property, you’re tasked with ensuring you pay your taxes. No one loves taxes, but they’re a regular part of everyone’s lives. Those who have been homeowners for a long time understand property taxes are all part of the experience, but for you, that may not be the case.
Skipping over these taxes could break the bank, and not understanding them makes it all the more challenging. For assurance and confidence in your homeownership, here is your guide to navigating property taxes.
What Are Property Taxes?
Firstly, you need to know the definition before you start calculating and paying them. They are any tax on property, like real estate, and the proceeds go to local and state governments. Your local government needs to raise money for public community services. Your taxes pay for those.
For example, if there’s a significant crack in a sidewalk and it finally gets fixed, those are your property tax dollars going into it. In addition to maintenance-type work, property tax dollars may go to local schools, police and fire departments and other local amenities.
No matter what type of property you own, whether it’s your own house or inherited or rental property, you’ll have to pay taxes on that too. However, if you rent an apartment or other property type, then it’s up to the landlord to pay those property taxes.
How Are Property Taxes Calculated?
It can be challenging to know how much to pay for your property taxes. There might be a million calculators online, but how do you know if you can trust them?
Your taxes depend on your local government’s tax rate and your property’s assessed value, whether it be a building or land. Multiply the two together, and you get your property tax. However, you do need to know those two numbers, which are explained below.
While you may have paid a certain amount for your home or property, that’s not the assessed value assigned to you. The assessed value isn’t the price you would sell your home for, either. Instead, this value is lower than the market value.
A property assessor sets a value for your home or property each year. You can find this on a recent tax bill, or you can search your city’s website for assessments.
Property Tax Rate
Again, your local government defines this rate, so the number will vary depending on where you live. A property tax rate in a big city will probably be more than one in a rural area.
Even if you live in the same house for years, the property tax rate could change due to tax variations and your property assessment.
If you’re still confused about this step in the process as a new homeowner, there are great guides online. “The First-Time Homeowner’s Survival Guide” is one many new homeowners use, and it includes a whole section about property taxes for more in-depth reading. Don’t worry, though — as you go through these experiences, they’ll become easier over time! It’s all part of the homeowner’s journey.
When Do You Pay Property Taxes?
Most property taxes are included within your monthly mortgage payment, so you’re likely paying them already if you’re paying your mortgage on time. Every time you pay your property taxes, it’s an estimate. If you overpay them, you’ll get a refund. If you underpay them, you’ll have to pay extra.
Although property taxes are included in your mortgage, you’ll still have to pay them even if you pay off your house or property. Once you pay off your mortgage, it’ll be up to you to pay property taxes. Plan ahead and calculate what you owe for a year and divide that by 12 months. To keep on a schedule, pay them at the same time you would’ve paid your mortgage.
Failing to pay could result in you losing your home. If you get too far behind, the local government has the right to sell your home to get the money you owed in taxes.
Paying your taxes has certainly become easier in recent years, since you can pay them online through your city’s or state’s website.
Pay Your Property Taxes With Ease
With all the excitement of being a new homeowner, you don’t want to be bogged down by misinformation or misunderstanding regarding paying property taxes. Although it will always be there, but with the knowledge you have now, you’ll be equipped to pay your taxes on time with little to no hassle.