When Do You Owe Property Taxes?

Posted by Frank Gogol

At this point, you are no stranger to taxes. Regardless of who you are, you have to pay taxes of some sort. However, it depends a lot on the state in which you live. In some states, the property tax might be higher, while in others it’s quite low.

With that in mind, who needs to pay these taxes, and when do you owe property taxes? In order for people to avoid surprises with overdue property taxes, this article will act as your guideline.

What Are Property Taxes?

Property taxes, as the name suggests, are those that are withheld based on the value of the things that are considered your “property.” Property tax doesn’t only feature the tax on your home or land; in fact, there are multiple types of property tax, including:

  • Land improvement, which is a tax charged on the value of the structures present on the land. This will include a potential home that was built on the land.
  • The land itself, a tax that is charged based on the land’s value, without including the improvements brought to the land.
  • Tangible property, a tax on personal things of value that you own – the moveable kind. This can include anything from cars to boats or any items of high value.

The most common property tax is referred to as real property, which is a merger between tax on land and tax on land improvement. That being said, these taxes can differ from state to state, so while a state might require you to pay tax on cars, others will not ask for this type of tax.  

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Who Needs to Pay Property Taxes?

Basically, everyone that owns property will have to pay some sort of property tax. In other words, if you are a homeowner or if you have land in your name, then you have to pay taxes on it. Even if the property is given away as a rental property, you’ll still have to pay taxes on it.

With that in mind, if you do not own the home and are only renting the place, then you do not have to pay any property taxes. This is the responsibility of your landlord.

How to Know How Much Property Tax You Owe

In order to calculate how much property tax you owe, you need to know two things: the assessed value of the property and the property tax rate of your local government. When you have both numbers, you may multiply the assets with the tax rate, and you’ll get the total property tax that you owe.

For example, let’s say that the value of your assets is at a total of $100,000, and the tax rate of your local government is 1%. In that case, your tax bill will reach $1,000 every year. In some cases, you can also pay monthly installments together with the payments for your mortgage.

When Are Property Taxes Paid?

Usually, the tax office will issue an assessment before or somewhere around the time when your taxes are due. This way, you will know exactly when to pay your taxes. Unlike other types of taxes, these are not paid monthly. Typically, they are paid annually or twice a year, depending on your possibilities.

In San Diego, California, for instance, taxes are paid bi-annually on the 10th of December and the 10th of April. These taxes are completely different from federal income taxes, which are paid on the 15th of December, respectively April.

In some states or countries, you might receive a tax discount if you choose to pay all your taxes in one sitting, whereas others encourage you to go for the bi-annual method.

How to Pay Property Taxes

How you pay property taxes may depend on the state in which you live. Whether or not you are still making payments on your mortgage may also determine how you pay your taxes. These are the most common ways to pay your property taxes:

Escrow Accounts

If you still have a mortgage to pay, then your property taxes will likely be done through an escrow account. These accounts are set up by your lender, and they will hold certain fees every month, such as payments for your insurance or your property tax payments.

These fees are paid monthly but are kept in your Escrow account. When the time for paying your taxes is due, the money will be pulled out from your Escrow account and used to make the payment for your annual or biannual property tax.

Bear and mind that while these payments are collected at the same time as your mortgage, they are separate entities. In no way are they part of your mortgage, so you should not consider that making these payments will make your mortgage smaller.

That being said, lenders need to be involved in the tax collection because unpaid taxes can lead to a lien. If a foreclosure happens, before they even get to sell the house, the lenders will have to pay off all of your missed taxes first – something that they definitely do not want to handle.

Direct Payments

Once you are done with your mortgage, or if your home has resulted from an inheritance, then you will no longer have to deal with lenders and Escrow accounts. That being said, even if the money is not charged automatically every month, it doesn’t mean that you won’t have to pay it anymore.

At this point, rather than having the money withheld automatically, you’ll have to go to your tax collector yourself and pay your taxes. Depending on the area, the location may change – but every city has its own government office where homeowners can go to pay their taxes.

In most cases, you will be notified whenever you are due for paying the tax. That being said, even if you somehow don’t get the notification, do not automatically conclude that you no longer have to pay taxes. Notification or not, you still owe the property and the payment will still have to be made. Call your area’s tax office and find out whether there was a tax issue on your account or not.

What If You Can’t Afford Your Property Taxes?

There are various circumstances in which you may obtain tax relief. So, you need to keep your eye out for that. You may want to check with your local government to see if your area has any tax relief for certain categories. For example, those that are over the age of 65, or people with certain disabilities might be exempt from paying these taxes.

Similarly, a lot of states and local governments offered tax relief for those who owned property during the coronavirus pandemic, exempting them from paying the tax. For instance, any penalties for those who missed their taxes on the properties in California got waived through May of 2021.

The Bottom Line

The property tax is something you have to pay throughout your whole life, or at least as long as you own property. Sometimes, you have to make monthly payments, for instance, if you pay a mortgage. However, typically, the payments must be made once or twice a year with your tax collector.

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