Taxes can be confusing. But it’s important to understand how real estate and property taxes work, especially if you own land, a home or a vehicle. While many people use the terms interchangeably, they sometimes refer to two different types of tax.
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Real Estate Taxes Defined
Real estate consists of land and the houses, buildings and other permanent structures built on land. One feature of real estate is that it’s immovable — it can’t be moved from one location to another. Another term for real estate is “real property.”
Real estate taxes, also known as property taxes, are “government-levied payments charged annually on immovable land, also known as real property,” as defined by Quicken Loans.
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Real estate taxes are based on the value of the property and are usually paid to school districts and local and state governments to fund schools, infrastructure, community projects and other other initiatives. The taxes are especially important to school districts and local governments because they make up the bulk of those jurisdictions’ revenues.
Property owners in all 50 states pay real estate tax, according to the Tax Policy Center. Some pay it directly to their local tax assessor. Others have it included with their mortgage payments, in which case the mortgage lender sends in the payment on the property owner’s behalf.
Personal Property Taxes Defined
Personal property is just about any kind of belonging other than real estate. As the Legal Information Institute defines it, personal property must be movable, it must have value and it must be capable of being owned by a person.
Personal property taxes are taxes levied on personal property as opposed to real property. They often fund schools and roads and other public works projects . They’re imposed by states and mostly benefit state revenues, but some local governments impose them as well. The types of property subject to personal property tax varies by location but often includes business equipment and vehicles and vehicles, boats and aircraft owned for personal use, according to the Tax Foundation.
Not all jurisdications impose personal property tax. For those areas that do, you can expect to pay your tax annually when you file your state tax return.
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This article originally appeared on GOBankingRates.com: What’s the Difference Between Real Estate Taxes and Property Taxes?
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