It is often extremely easy to confuse the various taxes related to real estate, particularly when the terms used to describe each are so similar. For example, real estate tax is often referred to as property tax, which means it is easy to think that personal property tax must fall under that banner.
However, it is important to note that personal property tax is actually a completely separate issue, and thus needs to be treated as such and accounted for when you are filing your taxes.
Here we will take a look at the differences between real estate tax and personal property tax, so that you are no longer confused when dealing with either one of them.
Real Estate Tax
As mentioned, this is often also referred to as property tax. The lack of the word "personal" ahead of the phrase "property tax" is important because that indicates that you are actually talking about real estate tax.
In the simplest terms, this type of tax refers to any money that you have to pay on an immovable property. This can refer to any land that you own and any of the structures that are built on that land.
As such, it will apply to homes, commercial buildings and any other properties that have a permanent location. If you own the property directly this type of tax will usually be paid directly to your local tax assessor, or will be included as part of your monthly mortgage payment so that you pay it indirectly. The rate you pay is also liable to change based on the judgement of your local authority, so it is important to stay on top of any changes in policy.
Personal Property Tax
Personal property tax is different because it applies to any of your movable assets, rather than ones that have a permanent location. Like real estate tax, it is an annual tax that may change based on the judgement of the local government, so it is still important to stay on top of this kind of tax and budget accordingly.
As for what it covers, personal property tax is paid on everything from mobile homes, through to vehicles, boats and planes. Essentially, any item that you own that can be moved will be subject to this type of tax.
However, it is similar to real estate tax in the sense that the amount you pay is often judged based on the value of the item. For example, your vehicle license fee is based on the value of the vehicle itself, and is thus a personal property tax. The same goes for the other types of homes and vehicles mentioned here.
As such, if you have plans to purchase a recreational vehicle of any sort, it is important to speak to an expert so that you can determine how much tax you will need to pay on the vehicle. Whatever you do, don't confuse the two and assume that paying for one means that you have paid for both.
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Please note the content is not intended to be, legal or investment advice. You should consult a licensed attorney or realtor for advice regarding your individual situation.