Property taxes, in various forms, have been around since the dawn of civilization. There is evidence of their use in ancient Egypt, Persia and China. Primordial taxation focused on land, as its agricultural value played a major role, in its time. To this day, property taxes are a main source of revenue for local states and governments throughout the world.
Property taxation is simply a levy assessed on property such as real estate. Real estate property taxes are typically assessed by county, state and local governments, instead of federal governments. Local authorities such as school districts, water and sewer companies also play a role.
State and local governments greatly rely on the tax income acquired from property taxes. In fact, property taxes are usually the biggest source of their income. In many states, property taxes give out more revenue than sales and income taxes combined. The national government plays a small role in the collection of property taxes.
Real estate taxes are deductible on federal income tax returns. The more property taxes you pay, the more you can write-off. In fact, there isn’t any limit on the property tax deduction. If you’re a new homeowner you could also minimize property taxes paid by the seller, that could have applied to your property tax debt. As the new homeowner, you can make this deduction, regardless of whether you paid back the seller or not.
Thanks to inflation and an inflexible tax code, those previously thought of as “wealthy” are now considered middle class. Because of this, millions of middle income American’s become victims to the AMT every year. To make matters worse, property taxes aren’t deductible under the AMT. The good news is that recent AMT tax bill legislation should provide middle class homeowners with the relief they need.
One way to comfort the tax burden is to make your property tax payments along with your monthly mortgage payments. By doing so, your funds are kept in a mortgage escrow account until the property taxes are due.
Since their introduction in ancient times property taxes have never been happily welcomed. To this day they still might not be celebrated, but they play an important role in our modern foundation. They fund the domestic budgets in which our federal government has minimal or no involvement.
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