If you own a house or a car, you probably know the property tax. Local governments charge these fees and use the money to pay for projects and services for the good of the community, such as schools, libraries, road construction, and emergency services.
There are two types of property taxes, one for real estate and the other for personal property, and the tax you have to pay is reduced if the property in question can be moved.
The terms "property taxes" and "real estate taxes" are often used to mean the same thing and, in most cases, it is. However, while real estate taxes only cover property taxes, such as a house, rental property, or vacation home, property taxes can also include personal property, such as vehicles and furniture. Therefore, the annual registration tax for your vehicle would pass as property tax. There is a huge difference between what the government considers real estate and personal property.
Real estate taxes are calculated on most private property in the United States. Some communities, such as Alaska, do not impose property taxes, but these communities are the exception, not the rule. Property tax levies are used to help pay for local services, such as road maintenance, cleaning, public schools, and local administrative offices. Property taxes are calculated as a percentage of the estimated value of the property tax. Local claims that pass with the majority vote are sometimes subject to property taxes.
Properties are appraised by professional appraisers to determine their fair market value. FMV is solely an estimation of what a property would sell on the open market. The local government creates a valuation commission, which is a percentage of the FMV, to calculate the estimated value of a property. For instance, if a property is valued at $ 1,000,000 and the local assessment tax is 70%, the amount of the property tax would be $ 700,000, which represents 70% of $ 1 million. Property tax is a percentage of the estimated value of the property. Therefore, if the local tax rate is 2% of the tax value, the annual property tax in the above example would be 2% of $ 700,000 or $ 14,000.
The Internal Revenue Service considers a house and the land on which it is located to be "non-movable" property. Also, barns, garages, and other buildings are not mobile. However, personal property includes moving objects such as vehicles, animals, and furniture. The general determination that something is considered immobile is whether the object would be damaged if it were moved. The walls of a house would be damaged if they were moved, so the house is not considered personal property. But most household items, such as furniture, would not be damaged if they were moved, so they are regarded as personal property. Personal property is better defined than anything else that is not real estate.
Each state imposes annual registration fees on your vehicle through the state car office. It is a simple type of property tax. Also, some states impose personal property taxes on other assets, mainly if the objects are used for commercial purposes or to generate income. For example, you can own a seasonal car rental business and have an inventory of thirty cars. These items can be assessed as personal property tax because they are used to generate income. However, most states generally exempt items below a certain value-added; for example, you may have $ 70,000 in personal property, but the first $ 50,000 in property is exempt. Therefore, you will only pay taxes for the remaining $ 20,000 of the property. Personal property tax is generally calculated as a percentage of the value of the item. Check with the state tax department for local property tax regulations.
Mobile homes that are primary or secondary residences fall into a dark category. If they are on rented land, they are considered personal property and must be authorized and taxed like a car. If the mobile home is located on your property, it is deemed to be real estate and is subject to property taxes. Most municipalities that impose real estate and property taxes also offer more exemptions. For example, exceptions generally apply to widows, the disabled, and the families of soldiers in combat.
Daniel P Vigilante CPA and Profit Consultants