Most people that own a home are familiar with the term real estate taxes. You may have also heard the term as personal property taxes. You may not be familiar with the fact that these actually refer to two different kinds of taxes. Below I will discuss them in depth!
What are real estate taxes?
Property tax is an ad valorem tax on the value of a piece of property that is owned. The tax is calculated by the authority in the area the property is located at. The national, state, and local governments all can determine how much the property tax is going to be.
The county will use these tax funds to provide sewer improvements, community construction, supply law officers, and other services to provide for the community. Property taxes vary from each jurisdiction. Therefore, it is important to know what your local property tax rate is.
How do real estate taxes work?
You can determine your property tax by multiplying the property tax rate by the current value in the land your interested in. Tax rates can change annually. Real Estate taxes are classified, to include: land, buildings, and structures. Therefore, any one who owns property is required to pay the taxes on it.
The current tax value of your home is determined by a tax assessor in your local area. Depending on the state the home can get assessed annually, Virginia it is every 2 years. The reason is to account for the counties' changing real estate conditions. The assessed value is usually much lower than the appraised value, about 20-40%. Keep this in mind if this is a home you are planning to purchase.
The payment schedule of property taxes will vary. In Virginia, property taxes are due twice a year. If you do not pay the taxes, the authorities can put a lien against the property.
What are personal property taxes?
Personal property taxes are also known as property taxes. These taxes are known to be items that are movable, such as: cars, RVs, Boats, etc. For example every year you renew your car registration, which is essentially paying the property tax on it. Personal property is taxed based on the items valued assessment. The current tax value on personal property taxes are determined by the city and county.
Mobile homes are taxed as personal property tax, not real estate. They are technically movable even though they are livable. However, if you own the land under the mobile home, then you are taxed under real estate taxes and based on the land assessed value. A permanent foundation can be added to a mobile home as well, then it becomes real estate taxed.
What is the true difference?
The main difference between the two, is the rate of taxes that you pay towards. Real estate taxes are much more than personal property taxes. To put it in perspective, when you register your car annually, you easily pay under $100 for a substantially high valued vehicle. A home is valued at hundreds of thousands with a much higher tax rate on it. Both rates are determined by the state and county you live in/ the item is in.
The terms can be confusing, some people think they are interchangeable. Your home is taxed for an amount of money based on your assessed value.
The most confusing item when it comes to how it should be taxed, is a mobile home. If the land is owned by the owner of the mobile home, then the land is assessed for real estate. If the owner does not owe the land, it is considered mobile and taxes as personal property.
Now you know the difference! Hopefully this will help you understand what taxes you are paying and why. Now you won't be so likely to use the two terms interchangeably.
