As a first-time homebuyer, knowing these details regarding property taxes is essential before signing the dotted line.
- Pre-Paid Property Tax
- It is a tax that the seller transfers to the buyer to own the home within the year of sale. For example, say Mr. X sold his house to Mrs. Y on May 1, 2020. At closing, Mrs. Y will pay, assume Mr. X’s pays $1,500 in tax, ($1500/12)*4= $500
- Regular Property Tax
- It is a tax paid by the buyer based on the assessed value. First-time homebuyers must be aware that property taxes change whenever there’s a transfer of ownership because the assessed value changes.
- For example, say Mrs. Y’s property was reassessed and taxed at $1,800 for 2020, she will be responsible to only pay $1,800 – $500 = $1,300 for 2020. Note, the $500 only applies to 2020’s tax bill because one can’t pay property tax twice in a year.
- Property Sales Tax
- The seller pays a tax in Florida, which is 6% of the selling price.
- Property Tax Deductions
- First-time homebuyers can claim federal and state deductions for property taxes. Use IRS Form 1040, Schedule A, to itemize your taxes.
- Mortgage Escrow Accounts
- Some lenders encourage or require their lendee to fund an escrow account that pays either the property taxes. It is a strategy used by lenders to keep their borrowers from losing their property through tax delinquency.
Are you looking to buy your first property? Feel free to reach us at [email protected] or 713 429 0272 if you have any questions!