Buying a home is a significant milestone in life, often seen as a symbol of stability and financial security. However, amidst the excitement of house hunting, many prospective homeowners overlook a crucial aspect of homeownership: property taxes. These taxes can significantly impact your housing expenses and long-term financial plans.
Understanding Property Taxes
Property taxes are levied by local governments based on the assessed value of your property. They serve as a primary source of revenue for funding public services such as schools, infrastructure maintenance, emergency services, and local government operations. The amount you pay in property taxes can vary widely depending on your property's location, size, and assessed value, as well as local tax rates and regulations.
Property Taxes by State: Ranked
Importance of Considering Property Taxes
Homeownership affordability can be significantly affected by property taxes. Property taxes could strain your budget even if you can afford mortgage payments and homeowners insurance.
Long-Term Financial Planning
Property taxes are an ongoing expense that can increase over time when you buy a home. Taking into account the history of property tax rates in your area and anticipating potential increases can help you make informed financial decisions. Failure to account for rising property taxes could lead to unexpected financial burdens.
Regional Disparities
The property tax rate varies from state to state and within the same state. A higher property tax rate is usually associated with urban areas because of higher property values and higher demand for public services, such as highly rated schools.
Impact on Resale Value
Taxes can also affect a home's resale value. Property taxes may discourage prospective buyers or limit the pool of qualified buyers who will buy your property, or the services that accompany the taxes, such as highly regarded schools, can make the property more enticing for prospective buyers.
Budgeting for Homeownership Costs
Besides mortgage payments, homeowners must budget for property taxes, insurance, maintenance, and utilities. The tax burden on your home can pose a financial strain if you cannot cover these expenses.
Property Taxes vs Tax Assessment
3 Property Tax FAQs
Are property taxes paid in advance?
In most cases it is the mortgage lender who pays property taxes, either from funds collected in escrow or from your monthly mortgage payment. Property taxes are usually paid twice a year. With that said, details such as payment frequency can vary.Â
Are property taxes based on sale price?
Not necessarily. Property taxes are calculated based on the value of the property, which includes both the land and the buildings on it. An assessor typically values the property every one to five years and charges the owner of record the appropriate rate according to the taxing authority's standards. Assessors calculate this value based on mill levy, also known as millage tax.
Can property taxes go down?
Yes, property taxes can go down. Here are a handful of strategies you can use to do it.
Check Your Tax Card
Your property's tax card will show the lot's size, the square footage, the room sizes, and other details. Your tax assessor uses this information to calculate your property tax. Check your tax card for errors and inaccuracies that could inflate your tax bill.
Compare Your Taxes With Your Neighbors'
The tax cards of comparable homes in your neighborhood are public information. If your taxes are too high compared to what your neighbors with comparable properties are paying, you may want to challenge your valuation.
Request a Revaluation
If you think your property is overvalued, you can request a revaluation. If the assessor's valuation is incorrect, you can submit your arguments. You may also be able to walk through your property with the assessor to point out any factors that make it less valuable.
You may want to proceed cautiously. If your property is revalued, you could end up with a higher assessed value and higher taxes. You should only make this move if you are reasonably certain the facts favor you.
Avoid or Downplay Major Improvements
You may have increased the value of your property by giving it a makeover. Adding an accessory dwelling unit to your aging home or installing park-like landscaping in your front yard can raise your assessed value. An outside improvement and a drive-by appraisal will likely increase the assessed value.
Apply for Exemptions
Tax bills can be reduced without disputing your home's value. Tax credits or exemptions can lower assessed values. Many cities and counties provide exemptions for seniors, the disabled, and veterans.Â
You can reduce your property tax bill without having to fight city hall. Find out about exemptions and credits in your area and see if any are available.
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