The terms “real estate taxes” and “property taxes” are often used interchangeably. Yes, there are similarities. In fact, property tax can refer to both real estate taxes and personal property taxes. And for all intents and purposes, both types of taxes can sometimes refer to the same thing. However, there are times when this isn’t the case. So, let’s provide some clarity for homeowners by digging a little deeper into the differences between real estate and property taxes.
Real estate tax is based on the assessed value of a home that a homeowner has to pay each year. In order to determine this value, the fair market value of the home has to be determined. Each municipality has a certain percentage that’s used as the multiplier to get the local tax rate. Another factor that’s considered when determining how much real estate tax must be paid is the value of other homes within the area where a home is located. Not all communities impose taxes on real property. Local levies are sometimes attached to this type of tax as well.
While including a home and the land it sits on, property tax also applies to “movable” property such as vehicles, electronics, and furniture. For tax purposes, a home and its land are considered “non-moveable,” meaning they couldn’t be moved without being damaged. Some states impose a tax on movable possessions, especially ones that are used for business purposes. Property tax can come in many different forms. For instance, the tax on a vehicle is in the form of annual registration.
In a nutshell, property tax includes both real (“non-moveable”) and personal (“moveable”) property that may include things like stocks and bonds and furniture. However, real estate tax only includes real, unmovable property. While some people think mobile homes are an exception, this isn’t the case. Mobile homes are considered moveable since they’re not fixed to any one location. Therefore, the tax that’s paid on them is actually personal property tax, not real estate tax. Several municipalities offer exemptions for military families and homeowners with disabilities.
Knowing the difference between property tax and real estate tax can help residential and commercial sellers and buyers make well-informed decisions about potential transactions and the related tax consequences. At Beaches Title, we provide an assortment of real estate title and closing service designed to make buying and selling more efficient and productive. Contact us today to learn more.