You pay a small fortune to purchase a house, you pay taxes on the income you earn, and you might even have to pay taxes on assets that you inherit or receive as gifts. So why do you also have to pay property taxes every year? And why might these taxes differ so much between states and counties? Here’s a quick look at what property taxes are all about:
The Purpose of Property Taxes
Property taxes are collected annually and fund local projects or institutions. The taxation of personal items is much less emphasized than the taxation of real estate property and financial assets like savings accounts. Although valuable personal assets (such as expensive artwork or antiques) might be subjected to taxes, this taxation tends to be relevant only when an item is sold or inherited.
Instead of taxing every piece of valuable property, local governments and public institutions rely more heavily on real estate property taxes. When local politicians talk about working within the limits of the local budget, a significant portion of these funds come in through property taxes.
Public school districts are some of the biggest and most important institutions that rely on property taxes. Even local property owners who do not have children ultimately end up contributing to the budget of the local school district. The reasoning here is that the entire community benefits when children receive a thorough education.
Why Property Taxes Can Differ So Much
School districts aren’t the only institutions that amass a yearly budget from property taxes. A homeowner’s property taxes might include requested funds from the city government, county government, school district, fire district, sewer and sanitation district, water district, and recreation district. These districts are not necessarily drawn according to city or county borders, meaning that two homeowners in the same city could pay vastly different property taxes because their homes are not in all of the same districts.
Additionally, property taxes can differ so greatly because the value of a person’s property is likely to change over time. Properties can potentially undergo recurrent reappraisal over the years in order to account for a change in property value. Between changes in property value and changes in district tax levies, even long-time homeowners can become confused when tax season rolls around.
Is Owning a Home Even Worth It?
Even though property taxes might seem overwhelming to homeowners, there are some benefits to owning your own house (as opposed to renting one). Although legislation may differ from state to state, there may be tax deductions or refundable tax credits for first-time and repeat homebuyers alike. Installing energy-efficient appliances and making energy-efficient home improvements in your house may also count toward tax credits.
Ultimately, owning your own house can be a very wise investment when planned out properly. Purchasing a home is a major decision to make and it’s important to be informed of all the details — including local property taxes — before signing any agreements. For more information about how property taxes affect your own personal property, contact a local attorney today.