The purchase of a new home requires learning all about various aspects of homeownership (financial, legal, and practical) that can be overwhelming to a first-time homebuyer and homeowner. As part of our ongoing All About series, LGI Homes seeks to provide an easy-to-read and easy-to-understand resource that goes in-depth on a variety of subjects connected to buying a home. Today, we explore the world of property tax and how it will play into your experience of buying and owning a home.
What is property tax? – Property tax is a tax you must pay on real estate you own. This includes your home and the land it sits on.
Who collects property tax? – Property tax is collected by the local government where you live, usually at either the city or county level.
How much do I have to pay in property tax? – The amount you pay is determined by the value of your home and the tax rate determined by your local government. Rates vary from one municipality to another, but generally, property tax is levied at a rate of between 0.2% and 4% of the home’s value.
What does the money go to? – It’s natural as a taxpayer to wonder where your hard-earned money is going. In the case of property taxes, the money is usually used as a form of revenue to fun important public institutions and features in your community. These include public schools, parks, community centers and more. While it may be inconvenient to pay, property tax is one of the few taxes that allows you to see exactly where your money went on a daily basis.
Will my property tax increase or decrease over time? – Many factors influence whether your property taxes increase or decrease. For example, any upgrades or improvements you make will increase the value of your home, thus, causing your property taxes to rise too. Government need is a huge determining factor in tax rates. If the government is currently facing no shortage of funding, the tax rate may lower, but if they need funds to finance a new project or maintain an established institution, rates may increase.
When are property taxes due? – The due date for your taxes will be determined solely by your local government. Some require payment to be made during tax season in April, while others extend the deadline as far out as October. The only way to know for sure when you need to pay property tax is by calling your local government.
Do I continue paying property tax once my mortgage is paid off? – Once your mortgage is paid-in-full, you will still have to pay property tax each year for as long as you continue living there. Any improvements or renovations you make will continue to influence your property tax rate, as property taxes are solely based on the value of your home and not what you owe.
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