The Basics of Property Taxes: What Every New Real Estate Owner Should Know

Owning and managing a property has both its benefits and expenses. As far as property tax is concerned, it’s a perpetual expense that every property owner must pay. If you have come across a property that you like, don’t forget to factor in the tax estimates and other long-term expenses before reaching a final decision.

The same estimations should also be made by new property owners to financially prepare themselves. New owners can often make their situations and debts worse by not being prepared for their new property expenses ahead of time. Go through the following facts to avoid ever being in that situation.

You Can Leverage Cost Segregation to Lower Your Income Tax

If you have just bought a residential or commercial property, you can leverage cost segregation analysis to lower your net taxable income, which in turn, can significantly defer your net payable income tax. The income tax benefits of cost segregation may also be applicable if you have recently renovated, remodeled, and/or expanded your property in some way. A cost segregation analysis reclassifies certain sections of the property. This reclassification is a major part of the tax saving strategy because it’s designed to lower your net payable property taxes as a result.

How to Calculate Your Property Taxes?

The simplest way to get an estimate of the property tax you owe would be to apply the following rule:

Estimated Property Tax = (Assessed Value of the Real Estate x The Applicable Property Tax Rate)

If you are not sure about the assessed value of your real estate, contact the local property tax department for that information. Assessed values are calculated and recorded by government appraisers. You may eventually be able to find your property’s estimated value on their website as well, but it may take some time for them to update the database, if your property is still new.

How Often Should You Pay Your Property Taxes?

Estimate your property taxes ahead of time and start saving as soon as you can. Set aside that amount to make the payment whenever you receive a bill from the department. As to exactly when you will be billed with property taxes, that will vary.

It depends entirely on the local authorities in charge of property taxes. You may need to pay your property taxes annually, bi-annually, or semi-annually, depending on the system they have there. However, every bill they send will have a last date on it. To avoid unnecessary penalties, always pay your property tax bill in full and before that date.

Most real estate owners understand the bank can take their property if they miss too many mortgage payments. However, what everyone does not realize is that the same can also happen if a homeowner does not pay his/her overdue property taxes within a stipulated period. The authorities can and often do seize real estate owned by noncompliant owners who cannot or do not pay their property taxes.