Founded by a former IRS Agent

Founded by a former IRS Agent

Difference Between Property Tax and Real Estate Tax

March 5, 2015

Difference Between Property Tax and Real Estate Tax

While property tax and real estate tax are two terms that often have the same meaning, personal property tax is entirely different than the latter. The type of property tax known as personal property tax is considerably different from real estate tax due primarily to the fact that the government distinguishes between personal and real property.

Real estate taxes are levied on the vast majority of of private properties within the United States, though there are some portions of Alaska, primarily those without many citizens, where this is not the case. These taxes are a percentage of the calculated tax assessment value of a property. The revenue that is earned from this tax is then put towards a myriad of local services in the area, such as the maintenance of public schools, snow removal and road maintenance.

The personal property tax is levied on all property that is movable, primarily a vehicle. This is done through the motor vehicle bureau of each state. There are times when certain states will place this tax on other possessions as well, typically ones meant for business. This tax is calculated by a small percentage of the total value of the item that is being taxed. There is a possibility that a portion of personal property could be exempt from this tax.

Deductions for Real Estate Property Tax

There are certain deductions available to those that must pay the real estate property tax, all of which are available to everyone that owns real estate property. The first of these is known as the Home Mortgage Interest Deduction. This deduction is provided to homeowners that have taken out a loan in order to purchase their home. When paying monthly mortgage payments, a portion of the payment pays off the actual debt, while the rest of the payment pays off the interest that has accrued. For those that have itemized deductions on their tax forms, it’s possible to receive a deduction for the portion of the mortgage payment that pays off the interest.

Mortgage points are also available to those that have received a loan. These points are basic fees owed to the lender, all of which can be deducted when itemizing taxes. All deductions could be subjected to the 3 percent Phaseout Rule. This rule limits the amount of real estate tax deductions for those that have earned over $254,200. In this case, a 3 percent reduction would be placed on the itemized deductions. Anyone that has invested in fuel cell property, solar electric property or solar water heating property could possibly receive a credit for 30 percent of the total costs on their taxes.

At Pogosian & Company, CPA, we work to provide a professional CPA services for real estate agents that are looking to minimize taxes.

It’s time to schedule an appointment with Pogosian Nazaryan & Company.