Some real estate investors make hundreds of thousands of dollars every year from the rental income. Yet, new property owners need to understand the tax rules to avoid expensive penalties.
If you need a property tax guide, keep reading. In this guide, you’ll learn about the difference between property and real estate taxes. The term personal property often confuses people.
Read the tips below if you want to learn about real estate tax vs. property tax.
Defining Real Estate Taxes
Real estate taxes are taxes that a homeowner will need to pay annually. The term property tax will often get used in the same context. The homeowner will pay the tax on the assessed value of the home.
Your fee will depend on your home’s value and the country’s area. Rural cities will have a lower real estate tax rate than famous cities.
Personal Property Taxes
Property tax will sometimes get mixed up with the term personal property tax.
Your vehicle is personal property, and you will register it each year. You will pay a property tax on it.
The tax will get assessed on its value, like the way your house’s tax value will get assessed.
Campers, planes, RVs, ATVs, and farm equipment will get taxed under personal property. These items are movable.
Mobile homes will get taxed as personal property instead of real estate. People who live in them live in them like a house, but the mobile home can get moved.
If you own the mobile home’s land, you can get it taxed under real estate taxes on the assessed land value.
What you pay for your property tax will depend on the municipality and the city. Also, it will depend on the personal property tax rate and how much each assessed value is worth.
What’s the Rate?
The rate of taxes you’ll pay can vary. Real estate taxes will cost way more than personal property taxes.
You can register a car for less than 100 dollars, at a value of up to 60,000 dollars. Yet, a home will get assessed at a higher amount with a high tax rate.
If you live in a less pricey area, you will still need to pay a couple of hundred dollars.
Real estate and personal property taxes might sound the same, but they aren’t. Your municipality will charge an amount based on the value of your home.
Movable items like furniture, vehicles, or business equipment will get taxed at a different rate.
Is Your Home an Income Stream?
Any money that you make during the year, you’ll need to report. This will include money from investments, bank interest, and paychecks.
Your house is an asset. You won’t need to worry about reporting income unless you end up making a profit from the sale. Your house will get taxed separately as real property.
Pick a Lower Taxed Area
Some property or real estate taxes will get based on the home value. You could pay more money in taxes if the value of your home increases. There are some ways to lower the property taxes, however.
Are the houses appraised at a much lower amount? The appraiser may have made a mistake. You should look at filing an appeal.
Yet, the effective tax rate is lower in certain states. For example, Alabama, Delaware, and Louisiana have lower property taxes.
Property Tax Exemption Can Lower the Bill
The property tax you end up paying could differ from the amount your neighbor will pay. There are some property tax exemptions like discounts given to seniors, veterans, or people with disabilities.
Some exemptions will be massive, so homeowners will end up paying a lower amount.
For example, in Honolulu, the median home price is around 800,000, almost triple the US average.
Yet, homeowners will pay a super low tax rate compared to other cities. They won’t need to pay property taxes on the first 40,000 of the assessed house value.
There are other factors that could even exempt them up to 80,000. People older than 70 years might get better breaks.
Work with a reputable real estate company who can help you find your dream home. Find an agent experienced in your preferred location. Work with Dean Miller Real Estate if you prefer this location.
What Do Property Taxes Even Fund?
Certain states will charge taxes because they need the money to pay for schools, pave roads, and cover the salaries of state troopers. Some states will fund most of their budgets on property taxes.
In North Dakota, people’s property taxes are a small amount of revenue. Yet, in New Hampshire, the property taxes bring in a lot of the state’s revenue.
Real Estate Tax vs. Property Tax
Understanding the difference between real estate tax vs. property tax is critical. Personal property tax refers to movable items. You should understand this before you buy any property.
Think about the value of the house and the location. A rural city will have lower taxes than a city like New York or Los Angeles.
Need more finance tips like this guide? Visit the finance and business resources on the blog today.