Wherever you buy a home in the United States, property taxes are an unavoidable part of homeownership. Here’s what every homebuyer should know:
What Are Property Taxes?
Property taxes are levied by local governments based on the assessed value of a property. These funds are essential for maintaining public services, including schools, emergency services, and infrastructure. In some states, personal property like vehicles and boats may also be taxed.
Can Homebuyers Determine Property Taxes Before Purchasing?
Yes! Real estate listings often include details about a property’s annual tax bill. Buyers can also request the seller’s latest tax bill and inquire about the property's last reassessment. Keep in mind that assessed values may change after a sale, as they are typically adjusted based on the purchase price.
How Are Property Taxes Calculated?
Property tax calculations vary by location. Generally, they are determined by multiplying the local tax rate by the property’s assessed value, minus any applicable reductions. The assessed value is usually a percentage of the property’s market value, considering factors like home condition, comparable sales, and local market trends.
For example, if a home has an assessed value of $200,000 and the local millage rate (tax per $1,000 of assessed value) is $0.005, the annual tax would be:
($200,000 - $0 in reductions) x $0.005 = $1,000 in property tax.
Are There Property Tax Exemptions?
Yes! Many states offer property tax relief for specific groups, including:
- Senior citizens
- Veterans
- Disabled individuals
- Surviving spouses
- Homeowners claiming a homestead exemption for their primary residence
Eligibility and application processes vary by state, so buyers should consult a tax expert to explore their options.
How Do Homeowners Pay Property Taxes?
The most common method is through an escrow account, where a portion of the homeowner’s monthly mortgage payment is set aside to cover taxes. Some homeowners choose to pay property taxes directly, though lenders may require an escrow account to ensure timely payments.
How Often Are Properties Reassessed?
Most properties are reassessed annually to reflect changes such as home improvements or community developments. Reassessments can result in higher property taxes if the assessed value increases.
Can Homeowners Challenge Their Property Tax Rate?
Yes! If a homeowner believes their property has been over-assessed, they can appeal the valuation. This process usually involves submitting documentation and possibly attending a hearing. Since there are strict deadlines, homeowners should check their local municipality's guidelines for appeals.
What Are Transfer Taxes?
Unlike annual property taxes, transfer taxes are one-time fees paid when a property changes ownership. Rates vary by location, and either the buyer or seller may be responsible for payment, depending on local regulations. Buyers should review transfer tax obligations with their REALTOR® and legal counsel before closing.
Final Thoughts
Property taxes play a crucial role in homeownership costs, so it’s important for buyers to understand how they work. For more information and resources, visit facts.realtor.
By staying informed, buyers can make confident and financially sound real estate decisions.
