
All homeowners pay real estate taxes, also known as property taxes. These terms are used interchangeably; however, they aren’t the same tax. Property tax is the amount of tax homeowners pay annually for their homes. Personal property tax is what you pay for movable items. Take a look at the difference between real estate and personal property taxes and how they work.
What Are Real Estate Taxes?
Real estate taxes are paid annually by homeowners on the assessed value of their homes. Each state and city municipality determines the real estate tax rate by multiplying the fair market value of a home by a predetermined percentage in the municipality. Large cities tend to have a high cost of real estate taxes. Not only does your tax depend on your home valuation, but it also depends on your geographic location. Rural cities have a lower real estate tax rate than major cities, coastal locations, or major metropolises.
For example, your home’s fair market value of $350,000 times the municipality percentage of 65 percent results in a tax assessment value of your home of $227,500. If you have the same fair market value but live in a municipality with a local tax rate of 3 percent, you’ll pay significantly less. The first rule of real estate is location, location, location for a reason.
While you can’t control your home’s tax assessment value, you can increase your home’s property value. Investing in the right repairs and home improvements can increase the home’s value and earn a better offer when it’s time to sell. The roof keeps your home protected from the elements and keeps you comfortable inside. When it’s time for roof repair, you’ll need a trusted roofer to assess the damage. The professional contractors at FHIA offer prompt roof installation and roof replacement by expert roofers using high-quality products with long-term warranty protections. The Better Business Bureau-rated Jacksonville roofer can handle all roofing needs including storm damage, water damage, outdated shingles, broken flashing, damaged decking, fallen trees, and more.
What Are Personal Property Taxes?
Personal property taxes are paid on your personal property. This refers to things that aren’t permanent and can move, such as a car, boat, RV, and business equipment. All of these items are movable, and therefore, their value is tax assessed, similar to your home’s tax value. If you live in a mobile home, for example, it’s considered personal property as opposed to real estate because it’s movable. If you own the land the mobile home resides on, the land is assessed for real estate taxes. The personal property tax you pay depends on your city and municipality, the predetermined personal property tax rate, and the assessed value of each personal item.
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Why Separate Taxes?
Real estate taxes are more expensive than personal property taxes. Homes are assessed at a higher value with a higher tax rate than personal items. It’s possible to deduct real estate taxes on your tax return as expenses if you live in the home and itemize your deduction on Schedule A. You could also deduct personal property taxes if you itemize, but this is done in a different section of the return and the deductions will be less.
Understanding your tax obligation and how it’s calculated is key to being financially prepared and finding ways to save on your tax return.