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Real estate taxesReal Estate Taxation) are a fundamental aspect of investing and owning property in the United States. For investors and owners, it is crucial to understand the specific terminology and processes related to real estate taxation in this country. In this article, we will explore the key concepts related to real estate taxes in the United States.
Tax Authorities
Tax Entities (Taxing entities)
Tax entities are government agencies responsible for collecting property taxes. In the United States, property taxes, also known as ad valorem taxation, to finance a variety of public services and local governments. There is no federal ad valorem tax; However, states have the authority to impose property taxes.
Tax districts which levy property tax
Property taxes are administered at the local level and may include:
- Counties: Counties can collect property taxes to fund local services.
- Cities: Cities can also impose property taxes within their municipal boundaries.
- Municipalities: Municipalities have the authority to collect property taxes for financing.
- Municipalities: Municipalities, such as towns or villages, may have their own property tax system.
- Special Tax Districts: They are established to raise funds for specific services, such as schools, fire protection, parks, community colleges, libraries, and road maintenance.
Property Tax Calculation
Property Tax
He property tax is an ad valorem tax levied annually on the taxable value of a property. This tax is used to fund the government and local public services.
Tax Base and Tax Rate (Tax base and tax rate)
- Tax base: It is the total of all taxable securities in a jurisdiction, excluding exemptions.
- Tax rate: Also known as the millage rate, it is the rate applied to the taxable value of each property to determine its tax burden.
Residential Exemption (Homestead exemption)
A residential exemption is a tax deduction that applies to a portion of the taxable value of a primary residence. This exemption is granted to the owner if he or she meets certain requirements, such as being the head of the household and having lived in the property for the required time.
Other exemptions
There are properties that are exempt from the ad valorem tax, such as government-owned properties or properties owned by nonprofit organizations.
Tax rate derivation
The tax rate is derived as follows:
- The taxing entity determines the budgetary requirements that must be met through the ad valorem tax.
- Then, divide the tax requirement by the tax base.
Tax Rates in Mills (Tax rate mills)
The tax rate is often expressed in mills ($0.001), dollars per $100 or $1,000 of taxable value, or as a percentage of taxable value.
Equalization factors
The equalization factors They are value adjustments applied to the taxable value to increase the equity and uniformity of tax burdens.
Tax Billing and Collection
Individual tax bill
The individual tax bill is calculated by multiplying the tax rate by the taxable value of a property.
Taxable value
He taxable value It is calculated by subtracting exemptions and adjustments from the appraised value.
Special assessments
The special evaluations They are additional taxes imposed on specific properties that will benefit from planned improvements, such as the construction of a road or sewer system. The assessment amount is based on the proportion of benefit each property receives.
Tax Lien Enforcement
The process of lien tax application and its collection occurs through the following steps:
- Issuance of a tax certificate (tax certificate).
- The purchaser of the certificate pays any taxes due.
- Request for a tax deed.
- Tax sale and start of foreclosure.
Sale of tax certificates
The buyer of a tax certificate pays taxes owed on behalf of the property owner.
Granting of Tax Title (Tax deed conveyance)
The grant of tax title transfers ownership to buyer at tax sale.
Tax sale
In a tax sale, the buyer should pay the taxes due. The owner in default may have the option of repossessing the property if he pays the arrears. If not redeemed, the state issues a tax deed to transfer ownership to the buyer.
Real estate taxes are an essential component of investing and owning property in the United States. Investors and owners should be familiar with these concepts and processes to comply with their tax obligations and understand how they affect their real estate investments.
