For many homeowners, property taxes are a fact of life. If you own a second home or vacation home, then you have property taxes for that property as well. These properties can be subjected to taxes at the local city, county and state levels. The tax rates and formulas can vary significantly, depending on the areas of the country that you live and vacation in. Therefore, while your primary residence may be subject to one level of taxation, your vacation home in another state may fall under different taxation levels. Consult with your tax professional or accountant, such as Allan J Rolnick, CPA in Forest Hills, NY, as they can assist you with determining your estimated property tax for your various homes based on their locations. However, here are a few of the areas that will impact your property taxes.
Using the Market Value or Assessed Value
In a variety of cases, the local government will use a market value for each home in their jurisdiction as part of the formula for calculating a homeowner’s tax bill. Usually a tax accessor is given the task of evaluating the market value of homes on a regular basis. Essentially, this is what your house would sell for in the current marketplace if you were to put it up for sale. Keep in mind, that this is just the start of the process.
Various districts may choose to use the assessed value of your home versus the market value to calculate your tax payments. This is essentially a percentage of its market value, but the percentage used will be determined by the local government’s tax authority for the homes within its specific jurisdiction.
Therefore, it is important to know if your county or city uses the assessed value and what percentage they use if they choose not to calculate the tax owed based on your home’s market value.
Determining Property Tax Rates
While not every county or city will use exactly the same tax rates, the formula to determine the amount of property taxes due is fairly similar. The property tax rates are based on the various number of tax districts and their financial needs for the year. This includes funding for schools, government offices and other maintenance needs. While there are other sources of income available, property taxes fill in the gap between what is needed and what will be received from other sources.
Therefore, you will find that the tax rate may adjust from year to year to account for the changing needs of your city or county. If other areas of income, such as the funds from the state or federal government may be reduced, the property tax rate may be increased to make up the shortfall.
So the tax amount owed is typically determined by multiplying the assessed value of your property and multiple it by the tax rate imposed by your tax authority. You can do this same determination for any second homes or vacation properties, depending on their location. However, you need to keep in mind that what you determine your assessed value of your property to be, may not be what your tax authority determines. If you feel that your property has been assessed too high based on current market conditions, then you will need to take advantage of the appeal process to make an adjustment to that value.
The tax rate may also be applied as the amount of tax that you will owe on a property based on each $1,000 worth of value. As a result, you will need to find out if your city or county uses the mileage rate, as determined by the $1,000 method. This may alter how much tax you owe for your primary home versus your vacation home where they determine the tax based on a percentage of the property’s assessed or market value.
As you can see, your property tax rate will be largely determined by the location of your property and the tax laws or tax authority that govern that particular jurisdiction. If you do own a second home, you will want to get yourself familiar with any appeal process that may be available regarding your property taxes. Additionally, it is important to determine if your state offers a homesteading option that can reduce your property taxes on your primary residence.
Allan J Rolnick, CPA, CTC