There is no doubt that buying a new home is one of the most exciting times of your life. While it is great to think about decorating the home and finally having a place to call your own is great, buying a home can be incredibly expensive.
Between the mortgage, closing costs, and other costs you will incur during the process, you can easily be looking at spending a pretty penny. There are also some other costs that you need to consider in addition to just the mortgage and utilities. One of the most important to consider and learn about is property taxes.
Confused about what property taxes are? If so, you’re not alone. This article will introduce you to property tax and how much you should expect to pay every year, to help further your understanding of the topic.
What are property taxes?
Property tax is a real estate tax that is paid by the land and/or property owner and is assessed by the government of your city or town. Whether you own a home, business, rental property, or anything in between, you are responsible for paying property taxes. The tax amount you pay will differ depending on the city and neighborhood that you live in, and the amount you pay will depend on the value of the land and property.
The money that the local government gets from these taxes is used to maintain the city in a variety of different ways such as helping fund law enforcement, education, and fixing roads. Property taxes are a large source of revenue for many different cities and are a fairly stable revenue source.
Property taxes are generally paid once a year, and the payment schedule can vary depending on your city. Usually, many will let you pay it in installments, as opposed to paying it off once a year. You should generally receive a bill in the mail that will detail how much you owe in property taxes in a given year. Of course, you can inquire with the city if you don’t receive it or have any questions about the amount.
If property taxes are left unpaid by an owner, a lien will be placed against the property. Be sure to be aware of any liens on any homes you are considering purchasing. Property tax as we know it has been around for many years, and there is a constant debate about whether property taxes should exist or not.
Some people in the USA also feel that their property tax should be lower, as it is much higher than in most European countries. However, there are those who believe they are fair and that other countries should implement similar property tax amounts. Either way, the topic of property tax will continue to be hotly debated. But for a new home buyer, they are definitely a cost that you need to consider.
What sort of property taxes should you expect?
So now that you know what property taxes are and all about them, how much will they be and how much should you expect to pay? Well, that is a question that has a lot of potential answers.
The rates are completely determined by the local government of your city or town. The city will have a tax assessor that will look at homes and assign them a certain property tax, depending on the fair value of the home. So a large 5 bedroom home with a pool in the backyard will have a much higher amount of property tax to pay than a 1 bedroom townhouse will, generally.
Of course, the city and state that you live in will also have a huge effect on the property tax you will pay. For example, in Hawaii, an average person will spend just above $500 on property tax each year, whereas an average person in New Jersey will pay nearly 9 times that amount. In general, the average American will pay just over $2000 per year for their property tax. Some states also have a vehicle property tax, so be sure to check out if the state you are living in or moving to has them.
As the amount can fluctuate a lot, you should be sure to find out the details of the property tax before purchasing a home. You also shouldn’t expect it to be a certain amount simply because the home is nice or not. Also if you do any improvements to your home or property, you can expect the value to increase, which will, in turn, lead to a higher property tax. Certain sites on the internet allow you to try estimate what your property tax will be, but the results should never be taken as fact, of course.
Hopefully, this article has shed some light on the topic of property taxes. They are definitely something to consider before buying a home and can end up being a pretty hefty sum depending on the aforementioned factors.