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The main source of funding for our government is taxes. The local municipal authority collects property taxes, which are then utilized to fund the development of local amenities. Taxes are due on any physical property, including houses, offices, and property rented out to other people, by any property owner or legal body.

Every property owner is required to pay property tax, however, they can choose to pay it twice a year or annually. Property owners can now pay their taxes online, and this article will walk you through the whole procedure.

Property taxes are an ad valorem tax, meaning the tax is based on the assessed value of an item. A property assessor determines the value of your property by estimating its fair market value (FMV)—the price a willing buyer and seller would agree upon in an open market.

To do so, the assessor reviews the sales records of comparable properties in the area—known as “comps”—that are similar in condition, features, and size. The assessor may consider other factors, too, such as the property’s rental income history (or potential), replacement costs, maintenance costs, and any recent improvements you made to the property.

To determine your tax bill, the tax office multiples your property’s assessed value by the local tax rate. For example, if your home is assessed at $200,000, and the local tax rate is 1%, your tax bill would be $2,000. Of course, the higher the assessed value, the higher the tax bill.

Some local governments apply the tax rate to just a portion of the assessed value. This is known as the assessment ratio. If your home is assessed at $200,000, and your county has an assessment ratio of 80% and a tax rate of 1%, your tax bill would be $1,600 ($200,000 × .80 × .01).

How to Pay Your Property Tax

In general, there are two ways to pay your property tax bill: as part of your monthly mortgage payment or directly to your local tax office.

  • PITI

If you have a mortgage, your property taxes may be rolled into your monthly mortgage payment. If so, your lender divides your estimated tax bill by 12 and includes that amount in your monthly payment, along with the principal, interest, and private mortgage insurance—four costs collectively known as “PITI” (principal, interest, taxes, and insurance). For a $2,000 annual property tax bill, for example, you would pay about $167 a month. Your lender estimates your tax bill, so you’ll get a refund if you paid too much, or you might have to make an extra payment if the amount you paid comes up short.

You can find out the total amount of property tax you paid by looking at box 10 (“Other”) of IRS Form 1098. Your lender will send this to you by January 31st if you paid $600 or more in mortgage interest the previous tax year. If you didn’t receive a 1098—and you should have—call your lender or find the information on your lender’s website. You may be able to lower your tax bill by appealing your assessment (if you think it’s too high) or finding out if you’re eligible for any exemptions.

  • Pay Your Local Tax Office

If you don’t pay your property tax as part of a monthly mortgage payment, you’ll pay the tax office directly. You should receive a bill in the mail that includes payment directions. Depending on where you live, you may have several payment options:

  • By check or money order sent through the mail
  • Online using a credit or debit card
  • Online using an electronic check payment (eCheck)
  • By telephone using a credit or debit card

In addition to the different payment options, you may get to choose if you want to pay the bill all at once or split it into monthly, quarterly, or biannual payments. Pay attention to any prepayment discounts offered—some municipalities provide a discount if you pay early.

How to Pay Property Tax Online?

Most municipal bodies have a specific method to pay the property tax online on their portal. There may, however, be certain exceptions to it as some municipalities may not allow online payment for the property tax (but that is not the case with most of the municipal bodies). Follow the steps below to pay your house tax online-

  • Visit the official website of your local municipality
  • Log in with your credentials. If you have not registered on the portal yet, then register first and then log in to the portal
  • Click on the tab, ‘Property Tax’
  • Choose your property type and the assessment year
  • Fill in other details such as the owner’s name, property identification number and other relevant information
  • Check the property amount, choose the mode of payment and complete your payment
  • Download or print the challan for reference

Note that the exact steps may vary from one location to another or from one municipality to another. However, the steps involved in paying the property tax will be similar to the steps mentioned above.

Alternate Method for Paying House Tax

Now, it is also possible to pay the municipal tax on online payment portals such as Paytm. The reason why you would like to choose these portals over the official site of the municipal body is the ease of the process. Follow these steps to pay your house tax on Paytm-

On Paytm App

  • Open Paytm App on your mobile phone
  • Go to ‘Recharge & Pay Bills’ Section
  • Scroll down to ‘More Services’ section
  • Click on ‘Municipal Tax’
  • Select your ‘Municipal Corporation’
  • Enter the required details such as Property Number, Property ID, Ward Number etc.
  • Click on ‘Get Tax Amount’
  • After checking the amount, select the payment mode of your preference and complete the payment

On Web

  • Go to the Municipal Tax Payment page on Paytm
  • Select your Corporation
  • Enter the details such as ‘Ward Number’ (if applicable)
  • Enter your property identification number such as Property ID, Property Number, Property Tax Number, House ID etc.
  • Click on ‘Get Tax Amount’
  • After checking the amount, select the payment mode of your preference and complete the payment

You can pay your property tax online in two ways – on the official portal of the local municipal body or payment platforms like Paytm. The whole process gets a lot easier with Paytm as it cuts out a lot of effort for paying the property tax.

Personal Property Taxes

Real estate—your land and any property attached directly to it—is called “real property.” When people talk about property taxes, they’re usually referring to this type of property. Of course, real property tax may not be the only property tax you owe.

Read Also: How Often Do You Pay Council Tax UK?

Depending on where you live, you may also owe taxes on personal property. Personal property is classified as tangible, which includes cars, boats, RVs, and aircraft, or intangible, consisting of things like stocks, bonds, insurance policies, and intellectual property. Like real property taxes (those on your home), personal property taxes are an ad valorem tax, meaning they’re based on the value of the property.

Tangible personal property taxes typically fall from year to year as the property’s value decreases. The value of intangible personal property taxes is made using a method known as calculated intangible value (CIV).

Not paying your property tax bill can result in a cascade of financial and legal consequences. Initially, you may face penalties and interest on the overdue amount. This will steadily increase the amount you owe.

Failure to address the issue promptly can lead to a tax lien on your property. A tax lien gives the government a legal claim on your property. This can also hinder your ability to sell or refinance the property, as you have to disclose whether or not there are liens/legal claims against your property during the sale process. There is also an industry that will buy this debt; the National Tax Lien Association estimates that $21 billion of real estate property taxes go delinquent each year, with up to $6 billion of these taxes being auctioned off to private investors.

One of the more severe repercussions is the potential for foreclosure. If property taxes remain unpaid for an extended period, the government may initiate foreclosure proceedings. This means they take control of your property, auction it off, and use the sale proceeds to recover the outstanding tax debt. This impact extends beyond the immediate financial burden, as a foreclosure can have long-term effects on credit scores and the ability to secure loans or housing in the future.

Who Has The Lowest Property Tax?

As a buyer, property taxes have the power to make or break your budget. This is particularly true if you reside in a state in the United States with a higher property tax. Hawaii has the lowest property tax rate in the country, at 0.27%, while New Jersey has the highest, at 2.26%. Twenty states have property tax rates higher than the 0.99% federal average. Here is a breakdown of the ten states in the United States with the lowest property taxes if you’re interested in finding out which ones they are.

In the US, local governments are in charge of collecting property taxes, which are typically determined by the property’s worth. State by state and county by county, the rates may differ. Schools, public infrastructure, community safety, and other initiatives are typically funded by property taxes.

If you’re looking to purchase a home, you should factor in the cost of property taxes while determining your overall spending plan. This is a cost that, like other taxes, is likely to go up in the future.

The five states with the lowest average property tax rates pay less than half (0.47%) of the 0.99% national median in the United States. The ten states with the lowest property tax rates in the nation are examined in further detail below. The Census Bureau’s 2021 1-year American Community Survey (ACS) Estimates are the source of all the information below.

1. Hawaii

Hawaii has the lowest property tax rate in the U.S. at 0.27%. The Aloha state has a home median value of $722,500. For a comparison with New Jersey, the state with the highest effective property tax rate in the nation at 2.26%, Hawaii’s $389,800 home median value is just over twice the home median value of the Garden State. Hawaiian homeowners pay $1,971 in median real estate taxes per year.

2. Alabama

Alabama is generally one of the more affordable states in the country. At 0.39%, it has the second-lowest property tax rate nationwide and a home median value of $172,800, which is almost $109,000 lower than the national home median value ($281,400). Homeowners in this state pay $674 annually in median real estate taxes.

3. Nevada

Nevada is tied with Colorado for the third-lowest property tax rate in the nation (0.48%). The $373,000 home median value in this state, however, is almost $92,000 higher than the nation’s home median value of $281,400. But homeowners in the Sagebrush state pay $1,807 in median real estate taxes annually, which is $988 less than the median real estate taxes paid in the U.S.

4. Colorado

Colorado ties with Nevada for the third-lowest property tax rate at 0.48%. But its home median value is $466,200, which is roughly $93,000 higher than Nevada’s figure. This is the sixth-highest home median value, after Hawaii, the District of Columbia, California, Washington and Massachusetts. Homeowners in the Centennial State pay $2,259 annually in median real estate taxes.

5. Idaho

At 0.49%, the Gem State has the fourth-lowest property tax rate in the country. Homeowners in Idaho pay $1,817 annually in median real estate taxes, which is almost $1,000 lower than the median real estate taxes paid nationwide. The home median value in this state, however, is $369,300, which is nearly $88,000 more than the national home median value of $281,400.

Bottom Line

When preparing to buy a home, you must factor in how much you will pay for property taxes, which vary nationwide depending on your location. As an example, homeowners in New Jersey pay $8,796 annually, which is the highest rate in the country. This is just over three times the $2,795 median real estate taxes paid at the nationwide level. And, comparatively, Alabama homeowners pay only $674 per year, the lowest median real estate taxes in the U.S.

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