One thing that you’ll need to think about when you’re buying a home is that of property taxes. Many first-time homebuyers don’t even consider the property taxes in the midst of their excitement of buying the perfect home. There’s many different kinds of tax issues that homebuyers might face when they purchase a home. We’ll educate you on how to tackle the issue of property taxes.
Do Your Research
You should most definitely research property taxes before you buy a home. You don’t want to be surprised to find out that your new home will have special assessments or a huge tax rate increase in the near future. Some things to look out for:
- Tax rate increases
- Home reassessments
- Supplemental tax bills
The first question that you should ask your realtor is “What is the current tax bill?” This will give you a good starting point for your property tax research.
Supplemental Tax Bills
A supplemental tax bill is basically a new homeowner’s overlapping bill of the previous owner’s taxes. Sometimes, this can include construction or additions made to the home that have increased the property value. This is also known as a “reassessment of property value.” Work with your realtor to discover whether this will be an issue.
Multiple Taxes For One Property
Depending upon where you are, you could face more than one kind of property tax. Special taxes imposed by states, counties and districts, as well as water and sewer can create additional fees.
Why You Have An Escrow Account
Homeowners are often required to have an escrow account. This will set aside funds for these types of expenses. The loan company will give an estimate of the amount of taxes and insurance due. Then, costs such as taxes and insurance are taken out of this account. If you are paying these fees through an escrow account, you should keep a close eye on it. Sometimes, payments fail to be made on time. You as the homeowner are then responsible for any late fees. You want to avoid these problems by checking the account frequently.
How Property Taxes Are Calculated
Property taxes are generally based on the value of the home. Each state and city uses their own formulas in order to calculate these fees. This is what can make property taxes a bit unpredictable. Property taxes can increase or decrease over time due to these factors that are included in each municipality’s formula.
A tax credit is a rebate that’s provided by the city or state. This could be in the form of an income tax credit. As home values have risen, so haven’t property tax bills, so these credits are welcome in today’s economy.
Some people are eligible for property tax deferrals. This allows the homeowner to pay all or part of the property tax until a later date when a home is sold. Many deferrals are geared towards low-income homes and senior citizens. These people would most benefit from this type of savings. Be careful though if you fall into one of these categories. Some states have much higher income taxes than property taxes, so the fees end up evening out.
The most important thing you can do when it comes to property taxes is your research. Once you have numbers, you can make a more informed decision about purchasing a property.