Real Estate

Property taxes Vs real estate taxes: what’s the difference

If you are new to the world of real estate, you may be feeling a bit confused by all the taxes that are assessed. To many people, the words “property taxes” and “property taxes” sound like the same thing, but there are some significant differences. Let’s take a look at them.

Property taxes are taxes based on the appraised value of the property. They are appraised on privately owned properties and funds are raised by local governments. Property taxes are the ones we often hear that fund schools and pay for road repairs.

Property taxes have two subcategories. Certainly there are real property taxes that are real property taxes, but there are also personal property taxes. Think of real estate as something that cannot be moved. These are things like the house, an outside garage, a storage building, or a barn.

Personal property is defined as things that can be moved, such as furniture. These taxes are sometimes called excise duties. Your car is also personal property. Believe it or not, but that license fee you pay for your car is a type of personal property tax. If you have a business that repairs items or sells merchandise, that inventory is personal property. In many cases, you are exempt from tax on the first $ 50,000 or $ 100,000 of inventory, depending on your state.

If you own an RV, this is counted as personal property because you can move it, even if you live in one full time. If you are on land that you own, you may have to pay real estate taxes on that land, but not in conjunction with the RV.

So what is the assessed value that these taxes are based on? Each local government has a department that analyzes what the real value of a property is. They look at the structure and value of the land itself. Sometimes they calculate these values ​​separately and sometimes they are examined together. The appraisal rate is a lower percentage of the appraised value. For many areas, the appraisal rate is 70% to 80%, which then reduces the value of the home and therefore the amount against which the tax rate is calculated.

It should be noted that Homeowner’s Association or condo fees are not the same as real estate or property taxes. Those fees go directly to the association to cover common area repair and maintenance costs.

Personal property taxes are assessed as a percentage of the value of the item. Each state and county will have its own regulations on how to calculate personal property taxes. Additionally, each state, as well as the federal government, allows a tax deduction on personal income tax forms for real estate taxes that have been paid in a given year.

There are also exemptions that certain homeowners may qualify for that help reduce the tax burden. These exemptions are often for the wounded, disabled, and elderly military.

Hopefully this has helped clarify the differences between property taxes and real estate taxes. Although they sometimes overlap, they are also quite different. It just depends on the item that is taxed.