March 30, 2023

Property Taxes Vs Real Estates Taxes – What’s the Difference

There are a lot of taxes to consider if you’re just starting out in the real estate industry. Although there are some significant distinctions between the terms “property taxes” and “real estate taxes,” many individuals perceive them to be synonymous. Let’s check them out.

The assessed value of a property is the basis for real estate taxes. Local governments collect funds through assessments on privately owned properties. We frequently hear about real estate taxes, which fund schools and pay for road repairs.

There are two subcategories of property taxes. There are both personal property taxes and real estate taxes, which are both types of taxes. Consider real estate to be an immovable object. These are things like the house, a garage outside, a building for storage, or a barn.

Things that can be moved, like furniture, are considered personal property. Excise taxes are another name for these taxes. Your car is also yours to keep. You might not realize it, but the license fee you pay for your vehicle is actually a kind of personal property tax. Inventory is considered personal property if you run a business that repairs or sells products. Depending on your state, you may be exempt from paying taxes on the first $50,000 or $100,000 of inventory in many instances.

Even if you live in an RV full-time, it is considered personal property if you own one because it can be moved. Real estate taxes may be due on the land where the RV is parked if it is located on property you own, but not in conjunction with the RV.

What then constitutes the assessed value upon which these taxes are based? There is a department within each local government that investigates the true value of a property. They examine both the structure and the value of the land itself. These values are sometimes calculated separately, and sometimes they are examined together. A lower percentage of the assessed value is used for the assessment rate. The assessment rate, which ranges from 70 to 80 percent in many places, lowers the house’s value and, consequently, the amount against which the tax rate is calculated.

It is important to note that condo association fees and real estate or property taxes are not the same thing. These fees go directly to the association to cover the costs of fixing and maintaining the common areas.

A percentage of the item’s value is used to calculate personal property taxes. How personal property taxes are calculated will be governed by each state and county separately. Additionally, real estate taxes paid in a given year can be deducted from personal income tax returns in each state and the federal government.

Additionally, certain homeowners may be eligible for tax relief through exemptions. Elderly, disabled, and wounded military personnel frequently qualify for these exemptions.

I hope this has helped clarify the distinctions between real estate taxes and property taxes. Despite the fact that they occasionally overlap, they are also quite distinct. It simply depends on the item subject to taxation.

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