Real Estate Taxes vs Property Taxes
Owning real estate has its advantages, but they come with certain responsibilities. These include the payment of real estate taxes and property taxes, which are sometimes confused. It’s important to understand the differences between the two and the impact they may have on your bottom line.
What’s the Difference?
Real estate taxes and property taxes differ in terms of who is assessed the tax and what type of activities the taxes pay for. In a nutshell, real estate taxes are assessed to property owners, while property taxes are tax on possessions.
Real Estate Taxes
Real estate taxes are assessed on a property’s most recent valuation. The revenue from these taxes is used to pay for schools, parks, roads, and other services owned by government entities. The amount of taxes paid depends on the value of the property and the tax rate for that area. The assessment, collection and enforcement of these taxes is usually handled by the county or state. Homeowners who fail to pay their property taxes will be subject to foreclosure of their property.
Property Taxes
Property tax, on the other hand, is a tax on your possessions. This could include furniture, boats, cars, jewelry, or any other items with a perceived value. Depending on the experience, the local or state government assesses a value to the asset and then taxes it accordingly. The taxes here are most often used for education, public works, and public safety.
Notable Differences:
- Who is taxed: Real estate taxes are assessed to homeowners, while property taxes are assessed to owners of possessions.
- Value of the tax: The value of real estate taxes depends on the property assessment and tax rate, while property taxes are based on the value of the asset.
- Periodic Taxes: Real estate taxes are usually paid every year to local government entities, while property taxes are assessed when they change hands, when they move across state boundaries, or when they are used for certain activities related to the property.
- Uses of the Tax: Money from real estate taxes is primarily used for school, parks, roads, and other government services, while property taxes are used for education, public works, and public safety.
Overall, it’s important for homeowners to understand the differences between real estate taxes and property taxes. Knowing the differences can help you organize your finances and take advantage of the tax savings that come with owning a property.