1. Property Taxes
Property taxes are based on the assessed value of your home. Your property taxes are determined by the county where you live. There are two types of property taxes: real estate and personal property. Real estate taxes are paid annually while personal property taxes are paid at the end of each year.
2. Personal Property Tax
Personal property includes items such as furniture, cars, boats, and motorcycles. These items have a fair market value that is determined by the current condition of the item. If the item is damaged or missing parts, then its fair market value may be lower than if the item was in perfect condition.
3. Real Estate Tax
Real estate taxes are based on the total value of your house. The amount of real estate taxes you pay is dependent on how much equity you have in your home. Equity refers to the difference between the price you originally purchased your home and what you owe on it today. When you sell your home, any profit you make above the amount you still owe on your mortgage is called equity.
4. How Property Taxes Affect My Tax Return
When you file your federal income tax return, you’ll need to report the full value of your home. You can deduct the portion of your property taxes that were paid in 2016 from your taxable income. However, only 50% of your state’s property tax bill can be deducted from your federal income tax return.