When you buy your first property, you experience a number of “firsts”; your first home, your first mortgage, and your first time paying a lot of bills that you have never had to before. While most of your bills are going to be self-explanatory, like home insurance and utilities, others, like property tax, can be a little less clear.
With tax season upon us, it’s important to understand any new payments you have to make, and if you bought a home recently, you probably already received your property tax assessment in the mail. But what exactly is property tax, why do you have to pay it, and where does your money go?
See below for property tax basics that everyone homeowner should know.
Property Tax Basics
Everyone that owns property, whether it be residential, industrial, commercial, or farmland, must pay property taxes each year. Generally, assessments are sent out in February, and any amounts owing must be paid by the end of October.
The amount you owe for property taxes is based on the assessed value of a property, and can be influenced by new developments in the area, surrounding properties, and improvements to the property itself.
The average American homeowner pays about $2,149 in property taxes, with taxes in more desirable areas (like certain counties in New York) reaching up to five times that amount. Typically, property values are reassessed every few years to ensure that property owners aren’t paying any more or less than they should be.
What Does Property Tax Go Towards?
Property taxes are usually payable to the county that you live in, and go towards things like:
- Public schools and community colleges
- Libraries and community centers
- Emergency services, such as police and fire departments
- Roads and snow removal
- Parks and recreation
Essentially, property taxes go towards making your community a better place for you and your family.
How Does My Neighborhood Affect My Assessment?
The neighborhood you live in can have a significant impact on the amount of property tax that you owe year over year.
For example, if you live in an older, perhaps less desirable neighborhood that is near new construction, like commercial areas or amenities, your property value could increase, thus causing your property taxes to increase as well. If there are attractions being built near your home, you can expect your property value to increase once they are complete.
Not only is your property’s value affected by the area you live in and the surrounding developments, it is also affected by the condition and desirability of neighboring homes. If your home happens to be older, but most of the homes around you are newer or freshly renovated, you could see an increase in your property assessment as well.
But it isn’t all negative—while these factors may increase what you owe each year, remember that the overall value of your property is increasing as well, meaning that if you decide to sell, you may end up getting more than what you paid for your house.
Adjusting Your Evaluation
If you happen to receive an assessment that you think is higher than your property’s current value, you can dispute it, but you will need to prove that your property should be valued at less than what the assessment has stated.
First, you should go to your county’s assessment office and request a copy of your property’s worksheet. This is a paper that lists information used to determine the value of your home, such as square footage, number of bedrooms and bathrooms, the age of the home, any upgrades, and so on.
After you have your copy, take a good look at it to make sure that it is accurate. For example, if your worksheet states that you have a pool, and you don’t, that could be what’s increasing your assessment value.
If you find mistakes, you would then need to talk to your county to find out what your next steps would be.
Preparing for Property Taxes
As a new buyer, you can get an idea of what your yearly property taxes will be like by asking your realtor. They should be able to provide you with a clear idea of what you can expect to pay each year so that you can plan ahead.
Keep in mind that since your property taxes are going towards making your county a better place, they will eventually add to your overall property value as well, making your home purchase a sound investment when you decide to sell sometime down the road.
As with any new home expense, property taxes can seem like a burden, but they are there to improve and maintain the area that you decided to buy in so that it continues to be an enticing place to buy for years to come.
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