What are property taxes?
Property taxes are taxes levied by individual states, counties, cities, or local government authorities and are directly tied to real estate. Renters do not pay property taxes, although a portion of their rent payments likely goes to fund their landlords’ property tax payments. Ultimately, it is the people, companies, or trusts that own homes, commercial properties, or even vacant land that are subject to property tax requirements.
The funds paid into the state, county, or local government are typically used for community projects, fire and police protection, public schools, street maintenance, parks, libraries, and other community priorities.
Property tax amounts are based on several factors. The amount of property tax you pay is tied to the predetermined tax rate for the county or municipality where your property is located, as well as the assessed value for your property. The property tax assessor regularly reassesses properties to determine whether their values are still accurate. While property owners typically want the value of their real estate to be high for appraisal and sale purposes, they may prefer a lower property tax assessment value because it means a smaller tax bill.
When are property taxes due?
Unlike federal individual income taxes, there is no single due date for property taxes. That’s because due dates are set by the state, county, or local government. While your property taxes may go to your state, county, and local municipality, you can expect to receive a combined property tax bill in most cases. That bill details the date your payment is due, as well as how and where you can remit payment.
In many areas, property taxes are broken into two separate installments, each due six months apart. For example, if your first installment is due at the end of April, the second installment for the year is likely to be due at the end of October.
If you have an escrow account as part of your mortgage loan for your home, the bank or mortgage company sets aside a portion of each mortgage payment for your property taxes and makes the payment on your behalf. If you do not make escrow payments for property taxes, be sure to make your property tax payment on or before the due date. If you mail a paper check to pay taxes, make sure that the envelope is postmarked no later than the date your property taxes are due.
As with any type of bill, it is important to pay attention to the due date for your property taxes. If your payment is late, you may face added penalties. In extremely delinquent property tax situations, your home may even be sold at a tax auction, with the tax authorities and mortgage company receiving proceeds off the top to satisfy your obligations.
How do I pay my property taxes?
The state, county, or local government where your real estate is located determines the available methods for owners to pay their property tax bills.
Property owners can almost always pay their taxes using personal checks or money orders. In addition, many tax authorities accept credit and debit cards. Many also offer online payment options that allow you to choose to have your taxes debited from your checking or savings account. However, be aware that paying with a credit card or using other online payment options may include additional convenience or processing fees.
How can I reduce my property tax bill?
If you are a property owner, you likely want to lower your property tax bill. A property owner who believes the assessed value on their property tax statement is too high may be able to request a new tax assessment. If the county or state assessor agrees and lowers the assessed value, the property tax bill is also reduced as a result. Of course, there is always the possibility that the new assessment results in a higher tax value than the owner was expecting, which can lead to increasing the property tax bill.
In most locations, there are programs available for some people that can reduce the amount owed or even freeze property tax bills at a lower rate. The most common exemptions include:
- Homestead exemption. Your property tax authority may offer a homestead exemption, which is essentially a discount for property owners who live in the property full-time. This exemption is generally not available for rental or vacation property.
- Senior citizen exemption. Senior citizens who meet their tax authorities’ age requirements and who live in their properties full-time may be eligible for a lower tax rate. Sometimes this exemption takes the form of a tax freeze, which ensures that property taxes do not go up for a specific period of time (or as long as the senior property owner resides there full-time). This can be particularly helpful for senior citizens living on fixed incomes.
- Homeowners with disabilities. Property owners who are living with a disability may also be eligible for additional discounts or reductions in their property tax bills. Each tax authority determines their own qualification requirements, exemption rules, and process for obtaining this tax relief.
- Religious or nonprofit organization exemptions. Nonprofit, charitable, and religious entities that own real estate are generally exempt from having to pay property taxes.
While these are fairly common exemptions, they may not all be available in your area. Conversely, there may be additional exemptions offered by your state, county, or municipal tax authority.
If you have more questions about your property taxes, reach out to a Rocket Lawyer network attorney for affordable legal advice. Confused about what you can and can't deduct on your federal or state tax returns, including property taxes? Get matched with a tax pro through Rocket Tax™ and don't do your taxes™ this year! Let us do them for you.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.