Inevitable things happen. It doesn’t matter whether you like them or not. Property taxes are one of those unwanted things that keep happening for as long as you are the homeowner. The problematic thing is that taxes are confusing. We don’t know much about them. Even filling out the tax forms is not simple. Sometimes answering simple questions can be complicated, like: how are property taxes calculated, who pays them, and how can you pay less in taxes?
This article is a short guide about property taxes in Lawton, both for buyers and sellers.
Who pays property taxes?
Let’s start with the basics: property taxes. When you own a home, you’re responsible for paying property taxes to your local government. These taxes are used to fund essential services such as schools, infrastructure, and public safety. The local tax authorities determine the assessed value, which is then used to calculate your property tax.
Now let’s see who pays the property taxes in a real estate transaction in Lawton.
When the seller has paid the annual taxes, the buyer will have to reimburse the seller for the prorated portion of the taxes. But if the taxes haven’t been paid, “the seller should be charged his or her prorated share with the amount placed in escrow.”
“This is, in fact, how real estate tax payments are usually arranged when you buy or sell a home. The home sale contract should clearly set forth these requirements, requiring each party to pay his or her pro rata share of the tax.”
How Property Taxes are Calculated?
In theory, the way your property taxes in Lawton are calculated is pretty straightforward, but it can get rather complicated in actual practice. The basic formula for calculation involves “multiplying the value of the property by a tax rate: Property tax = value of the property x tax rate.”
The complications arise when it comes to the actual factors and components that really determine your tax bill . . .
Property Value
- The assessed value is typically less than the market value, and the difference varies according to location.
- “Cars, machinery, and other property might be subject to personal property tax.”
Tax Rate
- “Real estate tax rates are often based on the “millage rate,” where one mill is equal to one-thousandth of a dollar. Your tax rate might not be expressed as a percentage, but rather as some number of mills.”
- “Some taxing authorities apply the tax rate only to a portion of the home value rather than to the full home value. That can reduce the bill.”
- “The local taxing authority, again likely your county but possibly your city or town instead, typically determines the tax rate.”
Who Can Take Tax Deductions?
Now let’s talk about tax deductions. As a homeowner, you may be eligible for certain tax deductions related to your property. One of the most significant deductions is the mortgage interest deduction, which allows you to deduct the interest paid on your mortgage loan.
To qualify for these deductions, you must itemize your deductions on your tax return and meet certain eligibility criteria. It’s essential to keep accurate records of your mortgage interest payments and property tax payments to claim these deductions properly.
How are tax deductions handled in a real estate transaction?
When a buyer files taxes for the year, he can deduct the property taxes he paid as an itemized deduction. In fact, “the IRS automatically treats the seller as having paid the property taxes up to the date of sale and the buyer as having paid the taxes due after the date of sale.”
Here’s an illustrative example . . .
“Bill purchases a home from Sandra with a September 1 closing date. The real estate tax year in the area was the calendar year. The real estate tax due for the year was $900 and was paid by Sandra on August 1. The sales contract Bill and Sandra sign should pro-rate payment of these taxes based on the number of days each owns the house during the year of sale. Bill will own the property for 122 days, which amounts to 33% of the year (366 days in a year ÷ 122 days = .3333). Bill should reimburse Sandra for 33% of the $900 property tax she paid—that is, Bill should pay $300.”
The complications arise when it comes to the actual factors and components that really determine your tax bill . . .
Property Value
- The assessed value is typically less than the market value, and the difference varies according to location.
- “Cars, machinery, and other property might be subject to personal property tax.”
Tax Rate
- “Real estate tax rates are often based on the “millage rate,” where one mill is equal to one-thousandth of a dollar. Your tax rate might not be expressed as a percentage, but rather as some number of mills.”
- “Some taxing authorities apply the tax rate only to a portion of the home value rather than to the full home value. That can reduce the bill.”
- “The local taxing authority, again likely your county but possibly your city or town instead, typically determines the tax rate.”
When the seller has already paid all the taxes for the year, the buyer will have to reimburse the seller for the prorated portion of the taxes. But if the taxes haven’t been paid, “the seller should be charged his or her prorated share with the amount placed in escrow.”
“This is, in fact, how real estate tax payments are usually arranged when you buy or sell a home. The home sale contract should clearly set forth these requirements, requiring each party to pay his or her pro rata share of the tax.”
Here’s an illustrative example . . .
“Bill purchases a home from Sandra with a September 1 closing date. The real estate tax year in the area was the calendar year. The real estate tax due for the year was $900 and was paid by Sandra on August 1. The sales contract Bill and Sandra sign should pro-rate payment of these taxes based on the number of days each owns the house during the year of sale. Bill will own the property for 122 days, which amounts to 33% of the year (366 days in a year ÷ 122 days = .3333). Bill should reimburse Sandra for 33% of the $900 property tax she paid—that is, Bill should pay $300.”
How to Lower Your Property Taxes?
If you think your property taxes are too high, you actually do have some recourse. Consider that an estimated 30% to 60% of properties across the country are over-assessed, so there’s a good chance you may be paying too much. If you think that’s the case, you need to appeal the assessed value. Start by understanding how your property is assessed for tax purposes. Review your property tax assessment carefully and look for any errors or discrepancies. If you believe your property has been overvalued, you may have grounds to appeal your assessment.
You can also lower your tax bill by taking advantage of certain programs offering tax deductions and exemptions for . . .
- Seniors
- Veterans and surviving spouses
- Disabled people
- Those who own agricultural land
Making improvements to your property can increase its value, but it can also affect your property taxes. Before making any significant improvements, consider how they may impact your property tax assessment. Some improvements may qualify for tax incentives or credits, so it’s worth exploring your options.
Taxes can be confusing. Talk to a real estate expert like DHS Realty Group if you would like to understand your property taxes. You can get an overview of the taxes you might have to pay before buying or selling a house in Lawton.