Before you make that choice to invest in the property market whether it be for investment purposes or as your home to reside in, it is important to understand the importance of property tax. Everyone who owns a property pays property tax and this enables Governments to fund infrastructure.
Expensive Property Means High Tax Amount
Tax is a dirty word as we all know but it is important to stay abreast of what is required of you if you choose to purchase property. The value of your property, just like other assets, determines the amount of property tax you pay so if you look at investing in a highly-expensive property, think about the amount of property tax you will pay. Investing in a smaller property within a certain area will see you pay less tax.
It is important to know that you could incur penalties for not paying property tax so keep this in mind within your budget that you will need to pay this.
Property taxes vary from area and State and are assessed by the local Government tax appraisal, the budget of the Government and a rate per thousand dollars of assessed value. Given that they are usually assessed yearly, it is important to keep this in mind and ensure that you have back-up funds for paying your property tax. Additionally, the property tax can rise when there is a re-assessment of value so be sure to factor in potential expenditure that could occur post-purchase.
If you are planning on building a property, property tax is determined based on the assessed value of the land until the property is built and you are occupying it. Once this happens, the property will be re-assessed for determining a value and thus the property tax owing.
Commercial and Residential Tax
Additionally, property tax varies from area to area dependent on factors such as the area’s demographics and facilities; this includes educational institutions, recreational areas and other services provided by the Council.
Property Tax Dispute
If you wish to dispute a property tax value, you need to request a re-assessment of the value of your property and this is something to keep in mind prior to purchasing one as disputes may take a lengthy time to resolve.
Tax on Property Investment
It is also important to keep in mind that even if your purchase of property is for investment purposes and you rent it out to tenants, property tax is still applicable. If the property is a commercial one, property tax is applicable and payable and can on occasion, depending on the local Government, be at a higher cost than residential property tax.
Furthermore, if you are borrowing to invest in a property, your lender might inquire about property tax; this is because if the lender needs to take back the property due to foreclosure, there will probably be unpaid property tax which the lender will then have to pay. So be mindful about how much you are borrowing and how much tax you will need to pay.