Real Estate Tax

How Real Estate Tax Calculated

Being a homeowner is indeed a matter of pride and joy but along with that ecstasy a responsibility of paying your share of real estate taxes is also attached. We all know them as property taxes, but as a refresher we must not forget that real estate taxes are based on an assessed value of a piece of land and the structures built on it, if any. Using a formula and articulating various factors viz. mill rate and assessed rate, an appraiser can determine the assessed value of a piece of real estate property.

Factorsfor Real Estate Tax Variation

  • Tax rates fluctuatefrom city to city and county to county and are usually paid on an annual or half yearly basis.
  • Tax year, marketvalues or mill rates are the deciding factors in variation of the tax rates. One other factor that determines your tax bill is the localityyou are based at.
  • If you enjoy a good amount of revenue from tourism from your property which is located in a prime location then certainly your real estate tax liabilities are also going to take a toll.
  • You are accountable to pay higher real estate taxes than rural areas.
  • The Municipality keeps a track of the public records in case of any improvement made to real estate that may influence its value. You may often think that you are being overtaxed, but the funds collected from these taxes provide support to many vital local programs, public facilities and services like recreational parks, schools and many other important basic amenities.

Benefits of Real Estate Tax

Irrespective of property taxes, the benefits for the property owner are numerous to ignore. Just by performing professional landscaping, you can substantially enhance the value of your property. The price shoot up in taxes means increase in home equity which in turn increases the chances for a home equity loan. Another vital advantage is that property taxes can be used as de jure deductions while filing your income tax return that eventually is going to bring the money back in your pocket. In case of fall in the property values you are liable to pay less tax.

How to Save Real Estate Tax

  • If you are a real estate investor then you must know the ways to save on your personal and investment taxes. Let's have a look at a few of the option open to investment property owners that can be used to save money.
  • First of all you should hire a qualified accountant to work with if you are serious about your investments on real estates. This will enable you to keep abreast with the up to date knowledge of all the latest rulings in terms of property taxes and real estate investment taxes. Also it will work wonders to track all of your expenses and advice ways how you can optimize your business revenue for your own long-term benefit.
  • You must keep an eye on your income and expenses. It entails keeping a detailed account of all the expenditures associated with your properties and ensuring that each expense is properly categorized under which home or investment it accrued to. This will help you to break down all your properties income and expense ratios so as to enable you understand which one of your investments is generating money for you and which one is proving to be a liability.
  • After keeping a track of your income and expenses, you will be in a position to cut down on many aspects of your rental property. For example if you have a floor repair or need to replace door in any of your properties, that expense can be depreciated stretching over a five-year time limit which enables you to pay less taxes on the rental income that you incur that year.
  • The possibility of 1031 exchange aspect should also be taken into consideration while you buy and sell your investment properties. Such type of real estate transaction will assist you to avoid your capital gains taxes in case you sell or buy a property with the profit at the same time. This can be termed as one of the best methods to save on investment property taxes over many years, and enables you to generate a big amount of equity.

How to Lower Your Real Estate Taxes

  • You need to find some ways out on how you can reduce your tax due liability. Consulting a good professional dealing in taxes can be of help or you can also verify the correctness of your property’s assessed value. You can hire a private appraiser to cross check the declared value’s genuineness.
  • You can search out books on the ways to reduce your property taxes and the deductions you can claim at the end of the year when you have filed your income taxes. Be a wise homeowner by doing some research work to save money on property taxes.
  • Being a homeowner, you are liable to pay property taxes to the state government. School taxes for your locality also come within these taxes.
  • Possessing a property in a rural area will make you liable to pay homeowners taxes once every year whereas, if you are living in a city you are liable to pay property tax twice a year, in some states. You pay winter taxes for the state and summer taxes for the city you reside in.
  • Learn and try to grab as much information as possible about tax savings. Learn how to augment the value of your real estate property. At time paying higher taxes may pinch you, but you may find some real estate tax options working in your favor.
  • If you are unable to search the right information income tax dedications or property tax details on the Internet, Gov.com or IRS.com will surely help you out. These sites contain all kind of facts and figures there that may be of help to you.