Condo Property Tax: Everything You Need To Know
Are you a first-time home buyer? You’ll be liable for paying property tax. Property taxes are mandatory in the US, and that includes condo property tax. But how does it work, and how do you pay it?
We have the answers to these questions in the guide below. So, read on to discover everything you need to know about condo property tax.
What Is Condo Property Tax?
Before we get to the whys and the hows of condo property tax, let’s first establish what exactly it is.
Property tax is an annual or semiannual charge levied by a local government, and paid by real estate owners within its jurisdiction. Therefore, anyone who owns real estate, from individuals to corporations, is liable to pay property taxes. Condo property tax is the property tax paid by condominium owners.
But why do you have to pay property taxes on a condo?
Why Condo Property Taxes Are Necessary
Your condo property taxes are used to help fund local infrastructure and public services. These may include educational facilities, parks and other recreational features, road maintenance, and even emergency response services.
By paying your property taxes, you play a key role in providing the community around you with the things it needs. And while high property taxes can put a serious dent in your budget, property taxes are generally eligible for deduction from your federal income taxes.
However, the deduction for all state and local taxes, including real estate taxes, is limited to $10,000 ($5,000 if married and filing tax returns separately).
How Condo Property Taxes Are Calculated
You’ll save yourself a lot of stress by understanding how these taxes are calculated before purchasing a new condo. Like all property taxes, the taxes on condos are not decided on randomly. They are carefully assessed by the government based on each unit’s value.
Assessors determine the market value of each unit and apply a specific percentage or mill rate. The mill rate is the tax rate per every $1,000 of a property's assessed value. Once these values are established, local governments will set the annual tax rates to generate the revenue needed for expenses.
This is why different regions can have very different condo property tax rates.
The assessment process typically involves analyzing recent sales data of comparable local properties. However, assessment criteria can vary slightly from one jurisdiction to another, with multiple factors influencing calculations.
Factors That May Influence Your Condo Property Tax Rates
Several factors can influence what you’ll pay in condo property taxes. Depending on your area, some will have more importance than others. But these are the most common factors that assessors look at.
Condo Value
The assessed value of a condo is the primary factor in determining property taxes.
Usually, higher-valued properties will incur higher taxes than those with lower values ascribed to them. The property valuation takes factors like square footage, property age and condition, and recent comparable local sales prices into account.
Condo Location
Are you thinking about buying a condo in an area with lots of public parks and community amenities? This may determine the property tax you’ll pay. Some areas levy higher condo property tax rates to cover the costs of providing the community with more public services.
Is your condo situated in a traditionally high-value area? Your property’s location also plays a significant role in its valuation, which in turn can affect the property tax owed.
Local Tax Regulations
Each jurisdiction has unique tax regulations. Some offer exemptions for seniors or veterans. In others, there’s a cap on annual increases. Property tax rates can also change year on year. Fluctuating assessed values, new developments in the area, and changes in local government budgets all play their part.
That’s why we recommend that you do thorough research before purchasing a new condo. Find out the current local property tax regulations of the specific area, and you won’t get any nasty surprises.
Are Property Taxes Included In Condo Fees?
Are condo property taxes included in condo fees? No. Condo fees, or homeowners association (HOA) fees, are paid to the building’s managers.
Condo fees fulfill a similar purpose, though, in that they cover expenses related to building utilities, maintenance, and repairs. They are used to meet these running costs, and therefore provide the building’s community with a safer, cleaner, and more efficient living environment.
But condo fees do not include condo property taxes. That said, some condo associations might give their members the convenience of handling their property tax payments for them. It’s not the norm, so check with the relevant condo association admin first.
How To Pay Condo Property Tax
You can pay your property taxes directly to your local tax office.
- Each jurisdiction has its own tax office where you can make payments. For more information on where your tax office is located, check your local government’s website.
- You can make your payments in person, but most tax offices also offer an online payment portal. This allows you to pay your condo taxes by debit or credit card, from the comfort of your home or office.
Does your mortgage include an escrow account (where a third party holds money or assets until the fulfillment of contractual obligations)? Your property taxes can then be included in your mortgage payments, and your mortgage provider will make the payments on your behalf, as they become due.
The Bottom Line
Paying condo property taxes means you can continue to enjoy various public services in your community. These taxes are typically tax-deductible, too. However, property taxes can vary considerably depending on the value and location of your unit.
At Hudson Condos, we help people looking to buy a condo, with an extensive database of available inventory. Prospective buyers can search for their perfect home according to their unique criteria.
Let us help you find your ideal condo. Contact us today to discuss your property needs.