ShmoopTube

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finance a la shmoop. what is real estate tax? own a home?

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well you'll pay tax on it on a high-rise well congrats and you'll pay a lot of

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tax on it. own an airplane well congrats again and yep you'll pay a lot of tax on [money stacked in front of a high rise building]

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it as well. as if it was real estate more or less. so

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how do you know how much tax you owe on a given home or building or property and

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well the answer is each state is different, or at least has its own laws.

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and generally speaking real estate taxes are local. ie local to your state and

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sometimes to the county that you live in. they are not federal. for example if the

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state of California is the one collecting your real estate tax the

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federal government in Washington well I'm just kind of coughs and looks away

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when you pay up. so how much do you pay? hmm?

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well in most states the amount is based on the purchase price of the home or

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property and then it carries an escalator or it goes up a little bit.

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that is if you've paid a million bucks for this awesome Shuba a mansion in Palo, [shack pictured]

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Alto yes this home sold for a million dollars in 2017. then you'd pay one point

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two five percent of the purchase price of a million bucks each year for your

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taxes or said another way you'd pay twelve thousand five hundred dollars in

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taxes each year on that home, and those taxes would go up a little bit each year

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such that they rose roughly along with the rate of inflation. so that's a real

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estate tax set by the purchase price. well in other states like Texas home

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prices are assessed regularly. whenever that means ,maybe every year maybe every

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few years, or if the owner asks. you know maybe something like that? well why [calendar pictured]

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wouldn't owner asked for a reassessment of taxes? well often homes are bought in

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a hot market and then for awhile the value of the home goes down. so by having

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a home reassessed likely for a lower price the owner saves money on taxes.

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well commercial buildings have different tax systems but are more or less based

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on the same parameters as homes. usually with a lot more zeros on the end.

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so where does all this real estate tax go? well back to the state to you know

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run things, but also to the local local authorities we're a big hunk of the tax

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dollar goes to local public schools to pay for teachers pensions their

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secretaries and yes maybe one or two illicit Bermuda vacations. [teacher walks out with bag of cash]

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