With homeownership comes a whole lot of new and foreign responsibilities that buyers may not have ever known about. For many, property taxes are one of those responsibilities that may be confusing to understand at first. However, being able to navigate property taxes is pretty important and can even save you money in the long run.
What is a Property Tax?
Property taxes are taxes levied on real estate by local and state governments. When you purchase a home, you’ll need to factor in your property tax as a part of your overall budget.
What Do Property Taxes Pay For?
It’s always good to know where your tax money is going towards! Property taxes are a significant source of revenue for local and state governments. They are used to pay for schools, parks and recreation, transportation, fire departments, etc. This is why areas with higher property taxes typically have the best public schools and county governments.
How is a Property Assessed?
Property taxes are entirely dependent on the value of your home and where it is located. In some areas your property tax may be very low compared to somewhere else, so it is important for buyers to take property taxes into account before deciding on where to live.
A property is typically assessed every year (in some counties up to every five years) and can go up over time as your home appreciates in value. Most county governments explain how their property taxes work and you can find this information through their local government website.
How Can I Find Out How Much I’ll Pay
To determine your property tax, a local tax assessor can establish a tax rate for where you live, and that amount will be multiplied by the value of your home.
For example, if your home is worth $250,000 and the local tax rate is 1.5%, your taxes would be $3,750 a year or $312 a month. It is important to note that rates and fees can change over time.
Before jumping into a home, make sure you figure out what your property tax will look like and factor that into your overall budget to ensure that your home is truly affordable.
This is not financial management advice. Please consult your financial advisor for financial management advice. The included content is intended for informational purposes only and should not be relied upon as professional advice. Consult with a finance professional for tax advice or a mortgage professional to address your mortgage questions or concerns. This is an advertisement. Prepared 3/14/2019.