What are property taxes and how do they work?
Property taxes are taxes that are levied on real estate by local governments. Usually, it is the County such as Los Angeles County Tax Collector. The assessor’s office determines the value of your property. The taxes are based on this assessed value. Contesting the assessed value is possible, but often difficult.
Property taxes are typically used to fund local government services. These include public schools, police and fire departments, road maintenance, and other public services. The amount of property taxes owed is calculated by multiplying the assessed value of the property by the local tax rate. The rate is expressed as a percentage of the assessed value and is usually around 1.000%.
These can be significant expenses for property owners. The amount owed can vary based on a number of factors, including the location, size, and value of the property. Some jurisdictions offer property tax exemptions or deductions for certain property types, such as owner-occupied homes or agricultural land. It’s important to review these possible exemptions with a qualified real estate attorney.
Property taxes are usually paid annually or semi-annually, and failure to pay can result in penalties or even the loss of the property through a tax sale or foreclosure. In most cases, with residential properties, these taxes are paid twice a year.
How much in property taxes will I have to pay when I purchase a new home?
The amount of property taxes you will have to pay when purchasing a new home depends on a number of factors, including the location and assessed value of the property. Property tax rates vary widely depending on the jurisdiction. The local tax assessor’s office determines the assessed value of the property.
To estimate the amount of property taxes you’ll owe on a new home, you can usually find the property tax rate for the area on the local government’s website or by contacting the local tax assessor’s office. You can then multiply the property tax rate by the assessed value of the property to calculate the annual property tax bill.
For example, if the property tax rate is 1% and the assessed value of the property is $300,000, the annual property tax bill would be $3,000. However, keep in mind that property tax rates and assessed values can change over time. So, it’s important to do your research and factor in potential changes when estimating your property tax bill. Check out this link for a list of states with the lowest property tax rates: Link.
It’s also worth noting that some lenders require that you set up an escrow account to pay your property taxes. This means that your mortgage payment includes your tax payment. This can make it easier to budget for your tax bill, but some prefer to make payments independently. Impounding your mortgage payments spreads the cost out over the course of the year.