Owning a property entails meeting several responsibilities. You will need to keep the house clean, do some remodeling to suit your taste and rhythm of life, repair all the flaws you have, pay the mortgage -in case you have completed your purchase with a loan- and, of course, pay the house taxes.
Remember that local governments collect property taxes to finance the implementation of projects that benefit the community, from roads to raising the budget of the police, schools, firefighters, among others.
Need to pay the property tax bill? Fortunately, there are several ways to pay the house taxes: including this amount in the monthly mortgage payment or by visiting your local tax office directly.
- 1 How to pay the taxes of the house?
- 2 What is a property tax?
- 3 How is the property tax calculated?
- 4 What are personal property taxes?
- 5 In summary, how to pay the taxes of the house?
How to pay the taxes of the house?
There are generally two ways to pay your property tax bill: as part of your mortgage payment or directly at your local tax collector’s office.
Pay house taxes through PITI
If you bought your home through a mortgage, you may be able to incorporate paying property taxes into your monthly loan payment. If so, your lender will split your estimated property tax bill over 12 months and include that amount in your monthly mortgage payment, that is, along with principal, interest, and mortgage insurance. This quartet is known in the financial world as PITI, which translates as principal, interest, taxes, and insurance.
If your local tax bill is usually $ 3,000 annually, you will end up paying an extra $ 250 each month. Since, in this case, it will be the bank or credit union that will calculate the tax bill, you may pay more than the bill, but don’t worry! If this is the case, you will get a refund.
Note: It could also happen that you pay less than you should. In this case, you will have to pay an additional fee in order to complete the property tax payment.
Important: You can find out the total amount of property taxes you have paid this year by reviewing IRS Form 1098. You will find this amount in box 10, “Other”. You should receive this form from your lender before January 31 of each year, at least if you paid $ 600 or more in mortgage interest in the previous tax year. If you don’t have your Form 1098 on hand and you should have received it, call the bank or credit union or look for information on their website.
Pay your home taxes at your local tax office
If you don’t pay the house taxes through the PITI of your mortgage, then you must pay directly at your local tax office. As usual, Every year you will receive an invoice by post that will include payment instructions. Depending on where you live, you will have the opportunity to pay your property taxes with one of these alternatives:
In addition to having the opportunity to choose between different payment methods, You can also select the cash or fractional payment (for bi-monthly, quarterly payments, etc.)
Note: Pay close attention to the communications you receive in the mail, as some tax offices offer discounts for cash payments or advance payments. Thus, you could reduce the taxes of the house by 2-3%.
What is a property tax?
Property taxes are ad valorem taxes. What does this mean? That are calculated based on the appraised value of the house or apartment. A property appraiser will be in charge of determining the value of your home. After studying its characteristics, you will calculate the fair market value (FMV), which is nothing more than that price that, in the open market, would lead an imaginary buyer and seller to close the deal.
Does that mean you’ll have to open the doors for an inspector? No. The appraiser will arrive at this calculation by reviewing the sale prices of the real estate registry of the area and, to be fair, it will only take into account those properties in similar condition, size and characteristics.
The appraiser may also consider other factorssuch as the property’s rental income history or rental potential, renovation costs, maintenance costs, and the value of any recent home improvements.
How is the property tax calculated?
Now, this way of calculating household taxes is not universal. Some states only apply the property tax rate to a portion of your assessed value. This is known in the tax sector as the evaluation index. Let’s go back to the example. If your home is appraised at $ 500,000 and the county has an appraisal rate of 80% and a collection rate of 1%, then your tax bill will be $ 4,000. ($ 500,000 x 0.80 x 0.01).
What are personal property taxes?
Not only real estate – buildings, premises, houses, apartments, land, etc. – are subject to a property tax. Depending on your state or city of residence, you may also have to pay taxes on other types of tangible propertiessuch as cars, trucks, recreational vehicles, jet skis, yachts, boats, and airplanes. In this case, we are again facing an ad valorem tax that will depend exclusively on the value of that property.
Note: Tangible property taxes typically decrease from year to year due to property depreciation. The local tax office will use the calculation formula for an intangible value (CIV or Calculated Intangible Value) to calculate the total amount of your invoice.
In summary, how to pay the taxes of the house?
All owners of a property, regardless of its type or whether you live in it or not, are usually subject to the payment of a property tax. Even if it is a vacant lot, you will have to pay something at the tax collection office.
While you cannot escape this obligation, what you can do is deduct up to $ 10,000 in combined state and local taxes, including property taxes. Before we say goodbye, let’s recap some of the concepts that we have covered in this article:
- Local governments collect property taxes in order to improve the quality of community services and do new works that benefit everyone or increase the value of the land.
- Property taxes belong to a special type of tax: ad valorem taxes. Why? Because your bill will depend on the value of your property.
- If you have an active mortgage, It is possible that you can pay the taxes of the house in conjunction with the monthly payment of the loan. Otherwise, you will have to do it directly at the tax office.
- Real estate is not the only one subject to local ad valorem taxes. Cars, boats, and other personal property may also be subject to these taxes..
Important information if you pay the taxes of the house along with the mortgage
If you are not sure when your lender will pay your property taxes, contact him and ask him to send you the payment schedule.