Ok. We have some bad news and some good news about real estate taxes.
But first, let’s brush up on what they are.
Every year, local governments charge taxes on all real estate property within their borders. These taxes are calculated based on the mill levy (tax rate) multiplied by the assessed value of the land owned and of the structures on it.
The taxes go to municipal services (hurray!), and potential first time homeowners should be warned that they’re also a big reason not to purchase property at the very top of your budget. If you max out with your mortgage, you’ll be stuck with more than just the cost of roof and water heater repairs.
You can look here, Tax-Rates.org for your state’s median property tax (as a percentage of home value). If you follow the links on Tax-rates.org, you can also find tax calculators and more specific information on median numbers for your county. For information on your particular property, you’ll have to go through your local tax assessor.
So now for the bad news:
All property owners have to pay real estate taxes. Yes, even you. And yes, even when you really really really don’t want to shell out hundreds or thousands of dollars that you’d rather spend on a girls’ getaway to Belize.
We understand. If it helps, you can look around at municipal services (libraries, parks, transportation, schools, and so on) available in your area, and feel good about your contribution.
Well, then you definitely won’t like hearing that your taxes will continue even after your mortgage has been paid off.
But we did promise good news, right? You’ll be pleased to know this good news comes in three parts:
1) You can pay monthly.
No, you can’t get out of it altogether, but it could feel a bit less painful if you avoid the once-a-year lump sum and opt instead to put aside a portion every month. Some lenders might even require you to include a monthly installment of the tax with your mortgage payment – to be held in escrow until the tax payment comes due. If not, it could be worth asking if it’s an option.
2) You can write it off.
Many local real estate taxes qualify for tax deductions. Ask your tax advisor for more information.
3) You might be able to lower it.
Properties are usually assessed every three to five years, and if the value decreases during that time, it could mean the owner is paying more than necessary. Not only that, but if you look over your property tax card (found through the local assessor), you might find discrepancies, such as room dimensions, lot size, or similar sales that don’t match up. If you point these out to the assessor, you may be able to get a re-evaluation that can help you appeal the tax. Yes, it’ll take some footwork and possibly an attorney, but it could end up saving you serious money.
That said, we hate to be party poopers, but please don’t go spending your tax money on Belize quite yet. Even if you do appeal, you’ll have to pay your tax as-is in the meantime.