Know the difference between property taxes and personal property taxes
If you are a homeowner, you are probably familiar with property taxes (you can even call them property taxes since the terms have become interchangeable). But hold the checkbook, the two are not exactly the same!
Although you may regret receiving your “property tax” bill or statement that lets you know how much tax you will have to pay each year or how much your mortgage company will pay for your property taxes. If you have a mortgage, it’s usually part of your payment. The confusion lies in the word property since there is also a personal property tax.
KEY POINTS TO REMEMBER
Â· Although the terms property taxes and property taxes are sometimes used interchangeably, the two are different.
Â· Property taxes are the amount that the municipality where you live charges you for the assessed value of your home.
Â· Personal property taxes are assessed on movable objects such as cars, motorhomes, boats and machinery, commercial equipment or furniture, movable objects.
What are property taxes?
Property taxes are annual taxes that a homeowner must pay on the assessed value of their home. Each city and state municipality determines the property tax rate by multiplying the fair market value of a house by the predetermined percentage in that municipality to obtain the tax assessment value. Have you ever heard people complain about the high cost of property taxes in their area? This is what they refer to, and higher tax rates are often found in larger cities like New York or Los Angeles.
The amount of property taxes you pay will depend on the value of your home as well as the part of the country in which you live. For example, a rural town in Oklahoma probably has a much lower property tax rate than a large city on, say, one of the coastlines or in a large metropolis like Dallas or Chicago.
How are property taxes determined?
Say your home has a fair market value of $ 350,000 and the predetermined percentage in your municipality is 65%, the tax appraisal value of your home is $ 227,500, or $ 350,000 x 65%.
If your local tax rate is 3%, you would pay $ 6,825 in property tax per year. If your local tax rate were higher, say 8%, you would pay $ 18,200 for a house of similar value in another locality. Location, location, location.
What are personal property taxes?
The property tax is what is called the personal property tax. Your personal possessions are things that are not permanent, but things that are mobile. For example, your car is personal property and when you register it each year you are essentially paying property tax on it.
Things like boats, airplanes, RVs, RVs, ATVs, farm equipment, and commercial equipment like furniture or machinery are taxed as personal property. Since they are all movable, a personal property tax is assessed on their value, in the same way that the tax value of your home is assessed.
Interestingly, mobile homes are taxed as personal property rather than real estate, even though, yes, you live there as a house, but technically they are mobile, so go figure. However, if you own the land on which you have a mobile home, it would be subject to property taxes on its assessed property value.
The amount you pay for your personal property tax on these items also depends on your city and town and the personal property tax rate in effect there, as well as the estimated value of each personal item.
Why are property taxes and personal property taxes separate taxes?
First, the tax rate you pay is different. Suffice it to say that property taxes are much higher than personal property taxes. Come to think of it, you can usually license a car each year for a fee of $ 40 to $ 75, with a value of $ 20,000 to $ 60,000, but a home is valued at a much higher value with a dump rate. much higher tax. Even the cheapest property taxes in the country for a modest-value home would likely be several hundred dollars.
Second, you may be able to deduct property taxes on your home as an expense on your federal income tax return if you live in the house and itemize the deductions on Schedule A. Personal property taxes can also be deducted if you itemize, but the deductions will be much less on a boat or RV than they would on your house and go to a different location when you return federal. This is not only because your personal property is generally less valuable than a house, but also because it is taxed at a lower rate than property taxes.
The bottom line
Now that you understand the difference between property taxes and personality property taxes, you may be less likely to use the terms interchangeably and more apt to understand the tax returns and invoices you receive for each.
Property taxes vs. Property taxes? How are they different?