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When many buy their first home, they are often unaware of the complex property tax details.
In a video that has gone viral on TikTok, one new homebuyer talks about her surprise about property taxes. The video was posted on X/Twitter by Ms Paragraphs @coldestwinters. In the TikTok video user @_jennjenn_r said her monthly mortgage payment was $1,151; then, after a year, she received a mortgage bill for $1,579. “That’s a $428 increase,” she said before going on to explain what happened. “I was under the impression my mortgage numbers would never change. If your house is valued at $20,000, then your property tax will be low, say $500 a year. Let’s say an investor comes in and revamps the house…and now the value is $150,000. It means the property tax will go up….This is what they did not tell you! Every year they do an assessment of your house, and if the value of your house goes up, they are going to increase your taxes.” She blamed her agent for not informing her of this.
Should buyers do their own research, or is it up to realtors to educate them about the process? There is much to know about property taxes.
Your property tax bill amount is based on your property’s taxable assessment and local tax rates. Local governments determine tax rates by dividing the total amount of money raised from the property tax (the tax levy) by the taxable assessed value of real property in the municipality.
Take Florida, for example. It is a state where property taxes play a significant role in local revenue collection. While Florida doesn’t impose a state income tax, property taxes are used by local governments to fund public services and infrastructure. Property taxes in Florida are levied on real estate properties and are based on the assessed value of the property and the tax rate set by local governments. Florida’s constitution mandates that property tax rates are determined by various local entities, including county and city governments, as well as school districts. The revenue generated from property taxes goes directly to these local governments, Ramsey Solutions reported.
Property tax in Florida is imposed on all property owners, including homeowners and businesses. Whether you own your primary residence, rental properties in the state, or inherited property, you are liable to pay property taxes on those properties. There is no minimum or maximum property value for property tax obligations in Florida so that you will owe property taxes regardless of the property’s value. Typically, local governments use a millage rate to calculate property taxes. A millage rate is the “dollars charged for each $1,000 of value.” For instance, if you have a millage rate of 5, you pay $5 in property tax for every $1,000 of your property’s assessed value, Ramsey Solutions reported.
There is also something called the homestead exemption. The homestead exemption is a legal regime to protect the value of the homes of residents from property taxes, creditors, and circumstances that arise from the death of the homeowner’s spouse. Such laws are found in the statutes or the constitution of many of the states. The homestead exemption serves a dual purpose, reducing property taxes for homeowners and offering legal protection in many states. This protection extends to shielding a home from certain creditors in cases such as the death of a homeowner’s spouse or declaration of bankruptcy. The extent of property tax relief under the homestead tax exemption varies based on the assessed property value, with lower-valued homes benefiting the most, Investopedia reported.
The homeownership rate for Black Americans still lags behind that of white, Asian, and Hispanic Americans. Black Americans often face higher denial rates for mortgages and home improvement loans, making it harder for them to become homeowners, CNN reported.
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