So, you are finally ready to have your own place, somewhere to settle down, paint your walls without worrying about security deposits, and have as many pets as you want. As you peruse through property listings in search of your first home, the criteria for the perfect place can seem never ending. While you might be focusing on things like size, price or location, property tax is an equally important part of home ownership. What are they and how do they affect you?
Property taxes are an ad valorem tax, meaning “according to value.” This form of taxation is based on a percentage of a transaction or property’s value and is applicable for both personal and real estate property. When you are simply renting a place, your landlord is in charge of paying the tax. Once you become a homeowner it is necessary to understand the basics of property taxes.
The amount of money each homeowner pays is determined by multiplying the assessed value of the home by the local property tax rate. The tax rate varies by county and can fluctuate with time, while the assessed value of the property increases with each improvement. A pool, renovated kitchen or addition can bring up the assessed value, and thus the property tax too. When your neighbors are selling at higher prices, this can force up your assessment too. Just increased expenses incurred by the county can lead to higher tax rates.
Let’s say you got a job in the Long Island area and want to move closer to the office. The current property tax rate in Nassau County, New York is 2.17%. You find the right place for you, and the local tax assessor values the home at $180,000. By multiplying these figures, you figure out that your annual property tax will come down to an annual $3,906 unless the tax rate changes.
Initially you can work things out with your lender, so the total amount of your annual tax is encompassed within your monthly mortgage payments. They will put the sum into an escrow account and pay it to the government on time. Even after turning in your final mortgage payment you are still responsible for your property taxes. Every year you will receive a bill.
While it may seem expensive, this real estate tax pays for things you and your family will enjoy every day. Local government will use your tax money to cover community services like street maintenance, first responders, the building and care of local parks, local public schools and more.
It’s important to keep this cost in mind when choosing a home so that you don’t immediately find you are far over budget. If you have made this mistake, or you find a home you love but the taxes seem overly high, talk to Property Tax Adjusters, Ltd., to see how you can get them reduced.