Real Estate Taxes vs Property Taxes

Understanding the Difference:  Real Estate Taxes vs Property Taxes

Are real estate taxes and property taxes the same thing?  While they are related, there are some key differences between the two.

Property Taxes:

Property taxes are taxes imposed by local governments on property owners. These taxes are levied based on the assessed value of the property, which is determined by local tax assessors. The revenue generated from property taxes is used to fund various public services and infrastructure projects in the community, such as schools, roads, and emergency services.

Property taxes are typically paid annually or semi-annually, and the amount owed is calculated by multiplying the property's assessed value by the local tax rate, also known as the millage rate. This rate is expressed in mills, with one mill equal to one-tenth of one percent or 0.001. For example, if a property has an assessed value of $200,000 and the millage rate is 50 mills, the property taxes would be $10,000 ($200,000 x 0.05).

The state of Indiana pays property taxes in arrears.  Paying property taxes in arrears means the taxes paid in the current year represent the taxes owed for the previous year.  Taxes in Indiana are due annually in 2 installments, due in May and November. 

Real Estate Taxes:

Real estate taxes, on the other hand, encompass a broader range of taxes related to real property ownership. While property taxes are a type of real estate tax, other taxes may also fall under this category. For instance, real estate taxes may include taxes on rental income, capital gains taxes on the sale of real estate, and transfer taxes imposed when property ownership is transferred from one party to another.

Summary:

Property taxes are a specific type of real estate tax that homeowners pay to local governments based on the assessed value of their properties. These taxes fund essential public services and are calculated using the local millage rate. Real estate taxes, on the other hand, encompass a wider range of taxes related to real property ownership, including property taxes as well as taxes on rental income, capital gains, and property transfers.

Understanding the distinction between real estate taxes and property taxes is important for homeowners and real estate investors to navigate their tax obligations effectively. By staying informed about these taxes, property owners can better manage their finances and plan for their future real estate endeavors.

View this similar article about maximizing your tax refund in real estate:  https://www.evansvillerealestatesearch.com/blog/beyond-bricks-maximizing-your-tax-refund-in-real-estate/

**Disclaimer:  This is not sound legal or financial advice.  Seek and consult with the proper professionals on what is best for your individual situation.  This is simply a conglomeration of ideas to get your juices flowing and your wheels turning to think of what you would like to do and the professionals you need in your circle to make the things happen that you want!

 

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