About property taxes and new construction homes

How are property taxes used?

In the U.S., property taxes are paid by property owners to local governments and are typically based on the value of the property. Money from property taxes is generally used to support local services, such as schools, public safety, and infrastructure.

How are property taxes calculated?

Property taxes are calculated based on your property’s assessed value and the tax rate of the taxing authority, which is commonly evaluated by your local tax assessor’s office. The assessment of your property is based on the tax assessor’s estimate of the market value of your home.

Market value is usually determined by using a sales comparison approach, a cost method, or an income method. You can also check with your local tax assessor’s office to find out exactly how property taxes are assessed in your area.

Who pays property taxes?

Generally, if you own both the land and the home, you’re responsible for paying property taxes associated with your property. The amount you pay is usually a percentage of your home’s assessed value, based on local and state tax rates.

However, if you don’t own the land, responsibility for property taxes may vary based on state and local laws.

What property taxes are paid on homes?

If your home is located on land you own and is titled as real property, your chosen lender may offer or require an escrow account to cover both property taxes and home insurance. This means you’ll pay a portion of these costs each month into your escrow account, and your lender will then pay the property taxes when they’re due.

How do property taxes differ for modern manufactured homes?

When a manufactured home is placed on a permanent foundation and the homeowner also owns the land, it is generally taxed similarly to a site-built home. However, there may be differences depending on your situation.

If your home is placed on rented land, such as in a modern manufactured home community or if it’s not permanently attached to the land, how property taxes are handled can vary by state and county. In some cases, your lender may still require an escrow account to cover personal property taxes on the home itself.

Some states may require the landowner to be responsible for the property tax, and in other states, it’s the homeowner who is responsible. In addition, the property tax amount is generally based on the value of the land and home together because the home is part of the value of the land. However, some counties will separate the property tax into two separate bills, one for the land and a second for the home, which can be helpful in a situation where you’re only responsible for the home portion of the property tax. Contact your local taxing authority to see if they can tax your home separately from the land.

How do property taxes work if you don’t own the land for a modern manufactured home?

If you’re renting land from a community or individual, the cost of the property taxes may be included in the property rent. In that case, the landowner will be responsible for paying the property tax to the taxing authority.

If the landowner is responsible for paying the taxes to the taxing authority and does not pay them, your home could be subject to a tax sale. Therefore, it’s a good idea to verify with the taxing authority that the property taxes have actually been paid.

The property tax may also still be required to be escrowed into your monthly mortgage payment, depending on the lender you choose to finance your modern manufactured home purchase. Some lenders may still require mortgage escrow payments to go toward the property tax and then issue a refund check to the homeowner after verifying the property owner has paid the property tax. Check with your chosen lender to find out what their policy is regarding escrows for property taxes.

Are there property tax exemptions available for homeowners?

A property tax exemption can be a reduced percentage of your property tax bill or a full exemption from property taxes. Check with your local tax office or appraisal district about any tax exemptions you may qualify for, such as for being a senior or a military veteran. By checking for tax exemptions, you may find out that you qualify for a reduction of your property tax bill.

Being a homeowner has a lot of benefits, including some potential tax deductions. And to learn more about what to expect for home financing or homeownership, explore our Learning & support articles for finance articles and FAQs.