Property taxes can be a complex topic and may come as a surprise to some people when they first buy a home after previously renting. At Clayton, we want you to feel confident and informed when you purchase a home, so here is what you need to know about property taxes, whether your new home is on property you are renting or own.
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 that is owned. Money from property taxes is generally used to help fund things like community safety, education 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 typically evaluated by your local tax assessor’s office. The assessment of your property is based on the tax assessor’s estimation of the market value of your home.
Usually, the market value is determined by either a sales comparison, cost method or income method. However, you should 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 speaking, if you own both the land your home is on and the home itself, you will pay all property taxes associated with your property. However, when it comes to manufactured housing, who is responsible for the property tax can vary based on state and local laws if you do not own the land the home is on.
What property taxes are paid on manufactured homes?
If your home will be located on land you own, your chosen lender will likely offer or require an escrow for the property taxes. This means that you will pay a portion of the property taxes each month into a mortgage escrow account and your lender then pays the property taxes from the escrow account when the taxes are due.
If you are placing your home on rented property, such as a lot within a manufactured home community or on land you are renting, the responsibility of the property taxes will vary depending on the state and county. If the home is not permanently attached to the land, your lender may still escrow for the personal property tax of 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 based on the value of the land and home together because the home is a part of the value of the land. However, some counties will separate the property tax into two separate bills, one property tax bill for the land and a second property tax bill 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 real property (the land).
How does property tax work if you don’t own the land?
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, and if the manufactured home was financed, the lender will verify the arrangement.
If the landowner is responsible for paying the taxes to the taxing authority and does not pay the taxes, 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.
If the landowner is responsible for paying the property taxes, the property tax may still be required to be escrowed into your monthly mortgage payment depending upon the lender you choose to finance your manufactured home purchase. Some lenders may still require mortgage escrow payments 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.
To find out more about the property taxes in your area, contact your local tax office or appraisal district. You can find out the requirements for the county where your home will be located and ask the landowner if property taxes will be included in the monthly property rent.
Are there property tax exemptions available?
A property tax exemption can be a reduced percentage of the 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 over a certain age or a military veteran. By checking for tax exemptions, you may find out that you could qualify for a reduction of your property tax bill.
Being a homeowner has a lot of benefits, including some potential tax deductions! You can find out more about the home buying process with our helpful guide. You can also check out our blog to learn about the homes we offer, visiting a home center, our commitment to affordable choices and more!