subject: Property Taxes and Real Estate Exemptions for Beginners [print this page] Property Taxes and Real Estate Exemptions for Beginners
The policies for assessing property taxes are determined by your state. Remember that your taxes are used to support state services. Through tax collection, the state can pay the salaries of firefighters and law enforcers, make improvements in the school system, and maintain public buildings.
To calculate the property tax, the state's tax rate is multiplied by the total assessed value of the property. You have to pay your property tax on an annual basis. However, most states allow homeowners to make payments in two installments.
Property Taxes and Mortgage Loans
If you apply for a mortgage, lenders will include the estimated property tax in your loan. They will set aside a fund that will be held in an escrow. When tax payments are due, the funds in escrow will be used to pay the county tax collector. The lender will submit the payments in your behalf.
In case a bank fails to withhold enough funds to pay the property tax, then it is your responsibility to pay the deficiency. There are also instances when mortgage lenders will not include property taxes in the home loan. In such cases, you are required to make the payments directly to the local tax office.
If you fail to pay the property tax of a mortgaged home, your lender will consider it as a default on your home loan. This can be used as a basis to start foreclosure proceedings. Your home will be sold and the money will be used to pay the tax debts.
Important Things to Know about Property Taxes
Almost 70 percent of a property tax will go to school districts to shoulder the costs of public education. The remaining proceeds will be distributed between local and county government agencies. Tax rates on properties are constant unless revised through legislation. Unfortunately, tax assessments can vary from year to year. That is because there are several factors that are considered to assess the real value of properties.
Most appraisers of real estate based their assessments on comparative sales report of other properties in the locality. Normally, a six month window is used to make the comparison. Other factors considered by appraisers include the historical value of the property and the potential income that can be generated from it.
You have the right to dispute the tax assessment on your property. This is particularly true if you fell that you have been overcharged. Remember that property assessors can also make mistakes. As a homeowner, you need to check the accuracy of the valuation statement. Look for the most common mistakes that can be committed by an assessor. These mistakes include incorrect address, inflated lot sizes, incorrect number of rooms, and inaccurate square footage.
It is advisable to seek ways how you can qualify for property tax exemptions. You might consider the Homestead exception which is applied on a property used as primary residence.
If you are applying for a new home loan, then your lender could estimate your property taxes and exemptions. Such estimate is also provided for those who apply for mortgage refinancing. If you want to get all available deductions, you should hire a tax accountant to prepare your tax returns.
