Real Estate Taxes
4 min read
Learn about how real estate taxes can affect your bottom line as an investor, manager, or property owner. Understand the basics of how these taxes are calculated and what you can do to minimize them.
What are real estate taxes and how are they calculated?
Taxes in real estate refer to the money paid by homeowners to local governments and are usually based on the value of their property. When it comes to understanding how these taxes are calculated, typically it is a combination of county, city, and state rate that is used to determine the amount due each year. Taxes may vary based on an individual’s location and if they are residing in special taxing districts, such as for schools or roads. The millage rate used typically differs from one area to another, but helps to fund public services such as parks and fire departments. Homeowners can contact their local tax assessor for more detailed information about their tax rates and billing cycle.
How do real estate taxes affect the value of your home?
Taxes in real estate can have a great impact on the value of your home. Taxes such as property tax, income tax, and municipal taxes can all add up to account for the market value of a house. Taxes are a major factor used in determining how much money buyers are willing to spend on a property. Thus, increasing or decreasing taxes can directly impact the price at which people are willing to purchase a piece of real estate, thus changing the perceived worth of the home. Real estate taxes can be used as leverage when pricing an item, so it’s important to consider them when looking into buying or selling your home.
What are some ways to reduce your real estate tax bill?
Real estate taxes can be a burden for homeowners, but there are some proactive steps to take that can help reduce the amount of these taxes. One easy way to lower your real estate tax bill is by appealing your property tax assessment. You’ll need to begin this process by filing an appeal with the county assessor; often times you’ll need detailed information such as comparable sales in the neighborhood or upgrades to the property. Additionally, research whether any tax relief programs are offered in your area. Many municipalities have limits in place on the taxes that may be charged on specific property types or offer exemptions from certain types of taxes and other similar benefits. Lastly, consider hiring a knowledgeable and experienced tax professional if you need assistance throughout the process. Taking these steps will help ensure proper and fair assessment of your real estate taxes and allow you to take control of your financial situation when it comes to owning real estate.
Are there any exemptions or deductions that you can take advantage of?
Taxes on real estate can be a considerable cost, but there are certain exemptions and deductions that you may be eligible for to reduce and manage your tax burden. Depending on where your property is located, you might be able to take advantage of homestead exemptions which exempt or partially exempt a homeowner’s home from property taxes. There are also deductions available where some qualified expenses related to owning and managing the property can be deducted from your taxable income. It pays to research all applicable exemptions and deductions for your particular situation, so you can maximize any potential savings associated with owning real estate.
When is the best time to appeal your property assessment?
Taxes in real estate can vary greatly from year to year, making it important for property owners to closely monitor their annual property assessment. If the assessment is deemed too high given the current market conditions, then the best time to appeal is typically early in the taxation cycle of your area. For example, if your jurisdiction has a tax collection deadline of December 31st, then you would want to aim to get your appeal in before October or November so it can be processed and finalized prior to the tax collection date. While appealing during other parts of the taxation cycle may not necessarily be discouraged, adhering to the earlier timeline will make sure any potential changes are applied before taxes are due.
How can you lower your property taxes in the future?
Property owners looking to save money should consider researching how to lower their real estate taxes in the future. Taxes in real estate can take different forms and understanding the complexities of these systems is key to effectively reducing property tax payments. This may involve appealing assessments or double-checking that all possible deductions or exemptions are applied, for example. Taking the time to understand any local regulations or rules regarding real estate taxes can also pay off in the long run. Knowing your rights and obligations as a property owner will help you prepare for any potential changes in tax rates and can save you considerable sums of money over time.
Real estate taxes are an important part of owning a home, but they can also be confusing and expensive. By understanding how real estate taxes are calculated and how they affect the value of your home, you can take steps to reduce your tax bill. There are also some exemptions and deductions that you may be eligible for, so it’s worth doing some research to see if you can save money on your property taxes. If you think your property assessment is too high, appeal it—you could lower your tax bill for the current year and potentially save money in the future as well.