Buying a home comes with several expenses other than the monthly mortgage payments. Property tax is part of those extra expenses you have to pay when purchasing a home. So before closing that deal with your real estate agent, make sure you know how much you are paying and what for.
What is a property tax and how does it differ from the other taxes? Property tax is what you pay to the government based on the overall market value of the house, including the land it was built on. The home value assessment is usually higher than the amount you paid for the house. It does not depend on how much you bought the house for but how much it is worth in the market. Property taxes are used by the government mainly to build and repair roads, schools, community buildings and other services like snow removal. Property taxes vary per area and are determined by a tax assessor.
Property tax relief
Most governments offer property tax relief and the requirements or conditions are different depending on your area. Here are some of them:
- The homestead exemption: This is the most common exemption where a part of your home assessed value is not taxed. Some states implement a cap on the exemption while some do not. Criteria for availing this exemption also varies.
- Tax rate caps: Maximum amount of property tax you have to pay to the government.
- Property tax deferral: This is only applicable to buyers who are disabled, senior citizens or have very low income, where they can delay paying taxes with an interest.
- Relief for military veterans: This can be availed by military veterans.
- Energy tax relief: For eco-friendly renovations.
You have to make sure that you have a solid plan for paying the property tax to avoid missed payments and foreclosure of your property. If you’re bad at budgeting, you can create an Escrow account where you pay a part of the estimated property tax and insurance every month. Or you can set aside an amount every month so you have enough money to pay for the property tax at the end of the year.
For more information about the property taxes in your area, you can consult your local assessor’s office or visit your town’s website.