Most homeowners in the United States will know that property taxes have to be paid. If you have a house, an apartment, or an estate, you may have heard concepts such as ”real estate taxes“ and “property taxes.” You’ve probably wondered what the difference is between these two taxes. Are they the same? Are they different? Do I have to pay for both? God, it’s a lot of things at once, but we’re here to guide you.
Usually, these terms are often confused and intermingled, and people have a bad time trying to fill out the declarations and correctly paying what is owed. Filling out tax declarations and paying taxes correctly can be a headache for many people. The process of completing tax forms, gathering all the necessary documents, and calculating the amount owed to the IRS can be time-consuming and confusing. There is always a risk of making a mistake, which could result in paying more taxes than necessary or even facing penalties. You just have to manage a couple hints, and everything will be all right. Trust me, it is not as complicated as it sounds, and your real estate investment will be safe.
Yes, Real Estate Taxes and Property Taxes Are Different
When you hear a friend complaining about how high the taxes on their property are, they are actually complaining about the “real estate taxes”, a fairly common confusion. Real estate taxes are levies based on the assessed value of a residence that the homeowner owes to pay. They must be paid on time and in full, because the IRS does not have much room for patience, and we all know that.
The real estate taxes are collected annually, or semi-annually, and depends on your local regulations and government what’s the tax rate that applies to your property. The rate must vary from one city to the next, so you better as in your local government’s office what are the correct real estate taxes you have to pay, based on the characteristics of the home, apartment o whatever property you own. In most of the US states, taxes are higher in the cities and urban areas, and lower in the rural areas.
This Is How You Calculate How Much in Real Estate Taxes You Have to Pay
Ok, let’s have a little patience here, because it might look kinda (a little bit too much) complicated, but I’ll try to make it easy: In the United States, real estate taxes are typically calculated based on the assessed value of the property. So far, understandable, right?
Ok, let’s keep going. The assessed value is determined by local tax assessors and is usually a percentage of the property’s market value. The actual tax rate is then applied to the assessed value to determine the amount of the real estate tax owed.
As stated before, the tax rate is set by local governments, such as counties and cities, and can vary widely depending on the area. It’s actually good to pay the real estate taxes on time, because that money is used by the cities’ administrations to improve services and infrastructure projects, such as schools, roads, and public safety.
Now, What the Heck Is the Property Tax?
So far, you know that real estate taxes are applied on properties that are fixed to the land, attached to the planet Earth. Good. Now, the property taxes can apply on some other kind of tangible and movable personal property, such as transportation vehicles.
Personal property taxes vary depending on jurisdiction and item. For example, one typical property tax in the US is the tax you pay when you register a new car you just bought. Or the registration tax for a boat, if you live by the sea or by a lake.
Property taxes also can be charged over RVs which, yes, they’re technically a house, but are registered as a vehicle. Having said all this, it’s not that complicated or complex after all, right?
Always Ask For Help on Taxes
The terms “property taxes” and “real estate taxes” are often used interchangeably, but when properly understood, you can see the differences. The IRS has a really complete and comprehensible guide that you can check here. You’ll find anything you need to know abotu what to pay when selling or buying a residence, the real estates concerned issues, like general taxes, mortgages, property taxes and more.
If you are right now filling your reports and declarations, take a look at this complete explanation, regarding the real estate transactions and other responsibilities, as the well-known 1098 and 1098-E forms.