Property Tax Q+A
It’s that time of year again! Yes, property taxes are coming due. In general, taxes are something we are all familiar with. Most of us have spent our working years contributing to taxes in some way. In the real estate world, we get a lot of questions about property taxes specifically; why do we pay them, how are they calculated, etc. In this blog, we are addressing some of those frequently asked questions.
What are property taxes and why do we pay them?
Property taxes are taxes you pay on real estate or other types of property that you own. Here in the United States, local governments collect property taxes in order to fund public services such as: roadwork, public parks, law enforcement, fire protection, schools, and more. Property taxes are the largest portion of funding for the local government; accounting for about half of the revenue. In North Carolina, there is no state property tax, which means tax rates are determined entirely by local governments. Cities and counties can levy their own taxes, so you will often find that areas that include more amenities are generally associated with higher property taxes to help fund and maintain public areas. Whereas more rural areas tend to have a lower tax rate.
How are property taxes assessed?
A local county assessor will evaluate and calculate property taxes by factoring:
The size of the property
Structure on the property
Square footage of the home
Age of the home
Lot size (corner lot, pie lot, etc.)
Amenities in the area (grocery store, schools, parks, etc.)
All North Carolina counties are required to conduct a property reappraisal at least every 8 years, but in some areas this happens more frequently. You can generally expect your property taxes to increase over time.
How are property taxes paid?
In most cases, there are two ways to pay your property taxes. One way is by rolling them into your monthly mortgage payment in an escrow account, and the other is by paying it one time annually to your local tax office. If you pay your local tax office directly, you should receive a bill outlining the different ways you can pay (Online, by mail, in person) and how much you owe. If you are one of many that have their taxes rolled into their monthly mortgage payment, your servicer is likely paying your taxes to the city for you. It is always a good idea to call your servicer to ensure that your taxes have been paid once they become due each year.
Hint: Real estate and personal property taxes in North Carolina are billed on an annual basis. Tax bills are mailed out during the month of July, and bills are due September 1 each year.
Are there any property tax exemptions?
There are certain parties that may qualify to be exempt from paying property taxes: some indigenous cultures, some veterans, some seniors. You can go to your local government website to see if you qualify for exemptions. Religious organizations, such as churches, are also typically exempt from paying property taxes.
Does owning a home allow for tax breaks or write-offs?
There are certain tax breaks associated with being a homeowner. You can deduct the interest and the property taxes you pay on your primary home as well as on additional homes/properties you own. You may also be able to deduct interest you pay on any home equity lines of credit (HELOCs) linked to your properties. While taxes are never fun, there are tax benefits associated with homeownership.
Real Estate Agents are not trained or licensed to provide legal or tax advice. Always be sure to reach out to a lawyer or tax professional for information specific to taxes or legal concerns. Please call us or email us if you need recommendations for a tax professional or lawyer in your area.