Property Taxes Vs Real Estate Taxes

Do property taxes and real estate taxes mean the same thing? No they don’t and are very different in fact. Many people confuse these two terms because property is a very common term used for real estate. These two words are used interchangeably; thus, property and real estate tax are always being confused upon. Paying for your property tax however is very different as what you need to spend for your real estate tax.

Property tax is actually your personal property tax. As a normal citizen, you are taxed for personal belongings that are mobile and movable. These things may include your car, truck, furniture and even livestock. Property tax is often associated with a business; thus, you are taxed for personal things that are used for trade and industry. A motorcycle, for example, that is used for food delivery in a business must be included in your property tax list. The same goes for heavy equipment used by a construction company. Mobile things that are used to generate income are therefore taxable.

You are responsible for the annual registration of your personal property. The state often provides a form where you will list down all the items used in business. The amount that you need to pay is a percentage of the personal property value. The higher the value means that the higher taxes you need to shoulder. Tax regulations differ with every state with some states giving exemptions up to a certain amount or value of property.

While personal property tax involves movable things, real property tax is based on real estate. Real estate tax refers to the tax one has to pay for his home, ranch, farm and many other properties that cannot be moved or transferred. Mobile homes, therefore, don’t belong in this category as they can be transferred from place to place.

Real property tax is usually determined by an assessor who visits the property yearly and evaluates its worth. The assessed value of a property is computed by multiplying the local assessment rate to the fair market value of a property. This assessed value is then multiplied to a tax percentage which now becomes the final tax for your property. Rates vary with different states. Some states have a tax rate of 2% while others can go as high as 4%.

The income collected from taxes is used for local education, medical services, infrastructure, police protection and many more services for the benefit of the citizens. Exemptions may be granted to those who are disabled as well as to senior citizens and charitable institutions among others. War veterans may also be exempted from paying real estate and property taxes as well as religious organizations and certain educational institutions.

If you own real estate and personal properties that are used for business, then you need to pay real estate and property taxes on a yearly basis. Investors who own several pieces of land must pay taxes for all of their properties. As Benjamin Franklin said, “In this world nothing can be said to be certain, except death and taxes”. One cannot avoid paying taxes but can choose to live with it and just strive to earn more money.

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