Property tax is collected at the local, or state, level and varies by county throughout the United States. This tax is based upon the fair market value of the property, including the land and any permanent structures built on the land. This could include your home, your detached garage, your barn and more, as well as the actual acreage of your deed. In this post, we're going to discuss even more aspects of property tax - and how you may be able to reduce yours, so keep reading.
The person who owns the property is responsible for paying the annual property taxes, which are regulated by the county tax assessor. Often, the cost of property taxes are figured into the homeowner's monthly mortgage and deposited into an escrow account.
What's the difference between state and federal taxes?
The easy answer to this question is simply that state tax is collected by the state to help pay the bills of that state. Federal tax is collected, or due, the federal government to help pay bills for the entire nation. State taxes are dispensed locally, while federal taxes help fund such things as the national defense system, veterans and foreign affairs programs, law enforcement, and to help pay interest on the country's national debt. Federal taxes may also help fund community development and social programs.
What is property tax used for?
While every state uses their property taxes in individual ways, common uses for state taxes include helping to offset the costs of :
- Public education.
- Medicaid and the Children's Health Insurance Program (CHIP).
- Transportation, such as the repairing or rebuilding of roads, bridges and railroad systems and the costs of public transit programs.
- Correctional facilities.
- Assistance for low-income families.
- Miscellaneous expenditures such as environmental education, maintenance of parks and recreation programs, and wages for public workers.
State taxes, in short, are used locally to help benefit the citizens of that particular state. It's good to note that as a homeowner, you should try to keep abreast of taxation in your county. Attend public meetings and notice when new projects are proposed that could raise your property taxes. These could include such things as new equipment for the fire or police department in your community, raises for local teachers, or improvements to local parks. All of these are things which improve your community, but as a conscientious homeowner, you should be aware that property taxes, including your own, will likely go up as a result. Educate yourself on which projects you have a say, and make sure you show up at the right time to cast your vote for or against.
Are property taxes still deductible?
You can deduct your property taxes annually when you file your income tax. This includes the property tax on your main residence, as well as any other properties you own. In order to take this deduction, you must itemize on Schedule A of your 1040 form. Things to consider when you take the deduction for property tax is whether you pay this tax through an escrow account with your mortgage company as a part of your monthly mortgage payment. If this is the case, make sure you deduct only the tax portion of your payments.
How do I find out what my property taxes are?
Property taxes are billed and collected through a county tax assessor, who prepares and sends a bill to your home. The amount is based either on the assessed value of your property or on the mill levy. For example, a mill could be equal to one-tenth of a cent. So, for every $1,000 your property is worth, you would pay $1. Mill rates vary, however, according to the value set forth by your county, or township or whoever it is who is taxing you. Mill rates are usually decided upon after your local government meets to set its annual budget. After all known sources of revenue are subtracted, the remaining portion of the budget must be raised through property taxation. This portion is then divided by the value of all town properties and multiplied by 1,000 to determine the mill rate.
Using this method, towns that have higher property values or that have more properties to include in the assessment will have a higher mill rate, which then translates into higher taxes for each property owner. Alternately, towns whose budgets depend less on property taxes, or whose homes are worth less, will have lower taxes. Mill rate is only one way the local assessor might determine how much you're required to pay in taxes each year. Other methods include performing sales evaluations on similar properties in the area and then making adjustments to your bill, using replacement costs, or utilizing income costs if you rent or otherwise earn income from the property in question.
If you own property and haven't received a bill for property taxes recently, you can still find out how much you owe and when it's due. Simply call or visit the office of your county tax assessor. You may also be able to access this information online through a county portal.
Additionally, you have the right to appeal your tax bill if you feel it's disproportionately high or based upon wrong information. This may be a good option for homeowners whose property is inaccurately described in the tax assessment. If your home is listed at four bedrooms instead of the three it actually contains, you're probably being overtaxed. If your home is your main residence, you probably qualify for a homestead exemption that can save you hundreds of dollars per year. And if your property was recently flooded or has tornado or hurricane damage, you may be able to appeal your assessment to get a temporarily lower rate. If you've recently had your home appraised and can prove that it appraised at a value lower than it was assessed, you may be able to appeal as well.
According to Forbes, only 2 percent of homeowners ever take advantage of the appeal process when facing their latest property tax bill, but if more did, they could save hundreds to thousands of dollars per year.
Can someone take your property by paying the taxes?
No person can take possession of your home simply by paying your back property taxes. But, if you become delinquent in your taxes, the state may have the right to seize it and sell it at auction to recover the lost income. In this event, a bidder could, technically, buy your home for the cost of the delinquency. Back taxes generate late fees and interest, as well, so if you do fall behind, it's best to catch up sooner than later.
Property taxes are no party for any homeowner, but to most, they're a small price to pay for the privilege of owning over renting. Just remember to stay on top of your taxes each year. Educate yourself on your county's mill levy and how it's derived, notice when new community improvements are proposed, and don't be afraid to appeal a bill that you feel is too high. As a homeowner in America, it's your right to pay a fair price on your property's taxation.