All About: Property Taxes
“In this world nothing can be said to be certain, except death and taxes,” Benjamin Franklin. If you own property, you pay property taxes. However, it isn’t always that simple. From “how much” and “how to,” or “do I pay my property taxes as part of my mortgage,” there can be a lot of confusion when it comes to property taxes. This is especially true for those that just purchased their first home. For those that are confused about their property taxes, here is some helpful information:
What is a property tax?
Let’s start from the beginning. A property tax is a tax assessed by the government on any and all real estate you own. The amount you pay typically depends on the state you live in and the value of your property.
How much do I pay?
Determining the property tax on your home is relatively easy. A local tax assessor will establish a tax rate for your county, neighborhood, or area of the city where you own property. This rate is then multiplied by the value of your home – and voila, that’s the amount you owe in property taxes for the year. Here’s an example:
$200,000 (home value) x 1.5% (local tax rate) = $3,000 annually in property taxes (or $250 each month (which is what you pay into your escrow account)) – more on escrow accounts to follow.
However, keep in mind that there may be other fees applied to your property taxes. Check with your local county tax assessor for more information. The rates and fees change over time and could affect your taxes.
How do I pay them?
This is where it can get a little confusing, as there are two different ways you may be paying your property taxes. Let’s break them down:
If you still have a mortgage, chances are you have an escrow account. Every month, your lender collects required insurance and tax payments from you – these are similar to your mortgage payment, but they are not the same! The money that goes into your escrow account is used to pay your taxes and insurance when they are due every year. In other words, an escrow account is holding money throughout the year, like a savings account, to ensure you have the money to pay your taxes at the end of the year.
If you have finished paying off your mortgage, or you never had a mortgage, your process is a little different. You are still responsible for paying your taxes. But now, you are in charge of paying them directly to your county tax collector. Be sure you have enough money to afford your property taxes at the end of the year – as you are not putting money aside every month, in an escrow account, to pay for these taxes.
Remember: Check your local tax rate before estimating how much your property taxes are for the previous year. The rates and fees can change.
Do you have any questions about property taxes? Give us a call; we have experience helping others and would be happy to provide guidance.