Buying a house can be an overwhelming experience for many of us — from figuring out how much home you can afford to obtaining the necessary financing. One important element of homeownership that is often overlooked is taxes. It’s essential to understand how property taxes work when you buy a house if you want to make well-informed decisions about your purchase.
In this blog post, we’ll break down all you need to know about property taxes and what they mean for your bottom line. From who pays property taxes and when, to exemptions and deductions, read on to learn more about this crucial part of homeownership.
What are property taxes?
Property taxes are levied by municipalities on behalf of their residents and are used to fund local services like schools, roads, and public safety. The amount of tax you pay is based on the value of your property. Your municipality will reassess your property’s value every few years to make sure that the tax you’re paying is in line with the current market value.
When you purchase a property, the municipality will send you a bill for the current year’s taxes, which are due in full within 30 days. If you’re unable to pay the taxes in full, you can arrange a payment plan with your municipality. However, if you fall behind on your payments, your municipality can place a lien on your property, which gives them the right to sell it in order to recoup the outstanding balance.
If you have any questions about how property taxes work in your municipality, contact your local tax office for more information.
How property taxes are calculated
Property taxes in the United States are usually calculated as a percentage of the appraised value of a property. The tax rate is set by the local government, and may be different for different types of properties. For example, residential property may be taxed at a lower rate than commercial property.
The appraised value of a property is determined by an appraiser, who looks at factors such as the size and location of the property, recent sale prices of similar properties, and any improvements that have been made to the property. The tax assessor then applies the tax rate to the appraised value to calculate the amount of taxes owed.
Some states allow homeowners to deduct their property taxes from their income taxes. This can provide significant savings, especially for those in high-tax states. Check with your local tax authority to see if this deduction is available in your state.
Who pays property taxes?
When you purchase a home, you are responsible for paying property taxes to your local government. The amount of tax you pay is based on the value of your home and the tax rate in your area. Property taxes are typically paid annually, and they are usually included in your mortgage payment.
When are property taxes due?
As a new homeowner, you may be wondering when your first property tax bill is due. Property taxes are typically paid in arrears, which means that you will pay taxes for the previous year on your home. For example, if you close on your home on September 1, 2020, your first property tax bill will be due in 2021 and will cover the period of January 1 to December 31, 2020.
Property tax bills are usually sent out by your municipality in late spring or early summer. Due dates vary by municipality, but are typically sometime in July or August. In some cases, you may have the option to pay your property taxes in monthly installments. Check with your municipality to see if this is an option.
Types of Property Taxes
There are two main types of property taxes: ad valorem taxes and special assessments. Ad valorem taxes are based on the value of the property, and special assessments are levied for specific improvements or services. Ad valorem taxes are the most common type of property tax, and they are typically used to fund general government expenses like schools and roads. Special assessments are usually used to fund specific improvements like sewer lines or streetlights.
In conclusion, property taxes are an important consideration when you buy a house. You need to understand how they work and the factors that affect them so that you can budget for your new home accordingly. Additionally, it’s essential to stay on top of property tax payments as missed or late payments can lead to additional fees and penalties. Taking the time to research and understand property taxes will help ensure that you make a smart investment in your new home.