Nothing is more fulfilling than having your own property. It’s one of the best investments for many reasons, and it could be one of the biggest financial decisions you could make in your life. Owning a property brings an incredible feeling, accomplishment and pride for many. However, along with this great joy, comes long-term financial commitment – this includes moving expenses, mortgage payment, maintenance and repair, and taxes. There are many types of tax related to buying a property, this includes sales tax, documentary stamp tax, transfer tax, and the most regressive one called Property Tax that is also referred to as Real Estate Tax.
What is a Property Tax?
A Property tax is also known as Real Estate Tax or House Tax. Basically, this is an annual tax imposed by your municipal authorities based on the value of your property. Whether or not your property generates income, you are committed to pay your property tax for as long as you own it. The amount is assessed based solely on the value of the house – the homeowner’s income and assets are irrelevant.
Property tax rate varies across countries, cities, and states. It’s usually collected by most countries once or twice a year.
What is a Property Tax for?
Just like most taxes, a Property Tax is used to upkeep local facilities like schools, roads, parks, libraries, and police departments. All residents / homeowners pay property taxes to support the city government expenditures and infrastructure to maintain a streamlined government.
Who pays a Property Tax?
When you purchase any property, you are bound to pay a real estate tax. Land owners are required to pay property taxes, as long as he/she owns a tangible real estate property such as a house, office building, or rentals.
What if you fail to pay property taxes?
Consequences of not paying your property tax differs across states and countries, but generally, it may lead you to penalties or tax forfeiture. Tax forfeiture is a process wherein the local state may take ownership of the property you own.
When do you stop paying property taxes?
As long as you own the property, you are required to pay this annual tax.
What if I can’t afford to pay my property taxes?
You may be able to ask for a “Tax Abatement” or “Tax Holiday”, if you have low income or financial difficulties. If you’re granted of tax abatement, your tax obligations may be reduced, subsidized or eliminated for a specific period of time.
How is Property Tax assessed?
Usually, municipalities hire a tax assessor or an elected official to determine the property’s current market value. A property’s value is typically based on the area, construction, and size of the property. Sometimes, it’s also based on the value of comparable homes in the area and from the recent or previously assessed value of the property. Still, property taxes can be complex, it varies from state to state, and each seems to have their own different ways to calculate property taxes.
Countries with no property tax:
- Cayman Islands
- Cook Islands
- Faroe Islands
- Norfolk Island
- Saudi Arabia
- Sri Lanka
- Turks and Caicos Islands
- United Arab Emirates
10 US States with the highest property tax rate
|Country / State||Property Tax Rate|
|New Jersey, USA||2.40%|
10 US States with the Lowest Property Tax
|State||Property Tax Rate|
|District of Columbia||0.56%|
When purchasing a property, it’s wise to know your property taxes before making a decision. Owning a property brings fulfillment to anyone but it certainly can be costly. Property taxes can trip you up and catch you off-guard, so make sure to do a little research, call the local assessor’s office if you may, or ask your real estate broker, before signing a deal.