If you’re a homeowner, you’re probably like most people and just assume that property taxes are a fact of life. While it’s true that you can’t get out of paying property taxes, understanding more about them can help you benefit from keeping up with them. You may even begin to appreciate what the taxes do for your community.
There are Consequences for Non-Payment
Everyone runs into a little financial trouble from time to time, but falling behind on your property taxes is one thing that you don’t want to do. Depending on the specific tax and the laws in your area, being late with even one payment may subject you to fines and penalties. If you fall too far behind, your home may be foreclosed upon to help the government recoup what you owe.
You Can Use a Credit Card in a Bind
Some states allow homeowners to use credit cards to pay their property taxes. You should check with your state to determine if this is the case, so you’ll have this option in an emergency. However, you should also be aware that states use third-party payment processing companies to do this and those companies often charge a 2-3% fee for each transaction. This is in addition to the interest you’ll be paying your credit card company, which means you could be paying significantly more than you would normally pay.
You Can Claim Property Taxes as Exemptions
When you file your annual income tax returns, the federal government allows you to claim your property tax payments as exemptions. This can mitigate what you owe to the federal government and may even qualify you to receive a refund. However, this requires keeping documentation to prove you made all of your property tax payments on time.
An Escrow Account Makes Paying Taxes Easier
Your mortgage company may provide an option for establishing an escrow account that you pay into with each monthly mortgage payment. You’ll be paying one-twelfth of your property taxes with each payment, so you’ll have all of the money you need by the time your taxes are due. It’s important to ensure that payment is made on time, however. You’ll be held liable for a late payment, even though the lender assumes responsibility for making your payments.
While local and state governments use property taxes to fund a variety of programs, that doesn’t make your obligation any easier to bear. When buying a home, it’s important to get the property assessed for taxes, so you’ll know in advance what you’ll be expected to pay. This can help you determine if you really can afford the home.