Buyer Resources - Articles

Buying Your Home - Property Taxes

How do property taxes work?
Property taxes are what most homeowners in the United States pay for the privilege of owning a piece of real estate, on average they are about 1.25 to 1.65 percent of the property's assessed value per year. Property taxes usually include local tax assessments. These annual local assessments by county or local authorities help pay for public services, such as schools, police stations, etc., and are calculated using a variety of formulas.

Are property taxes deductible?
Property taxes on all real estate, including those levied by state and local governments and school districts, are fully deductible against current income taxes.
Mortgage interest on a 2nd home, however, is deductible only if you itemize. Check with your accountant or tax adviser for specifics.

Where can I learn about appealing the assessed value of my property?
Sometimes, the assessed value is different than the current market value. If you notice that the assessed value on your home is too high, contact your local tax assessor's office to see what procedures to follow to appeal your property tax assessment. You may be able to appeal your assessment informally.  Most likely, however, you will have to go through a formal tax-appeal processes, which begins with an appeal filed with the appropriate assessment appeals board.

What is an impound account?
An impound account is a trust account established by the lender to hold money to pay for real estate taxes, mortgage insurance and homeowners insurance premiums as they are received each month.

Do all loans require impound accounts?
If you are taking out an FHA or VA loan, the lender can require an impound account to pay real estate taxes and hazard insurance premiums, as with a standard loan. Most conventional loans do not require an impound account.

Dina Romero
Dina Romero
Broker Associate