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How do property taxes work? – Lawyer Up


So just when you thought you spent every last
dollar, the tax man brings you back for more money. This week we take a look at property
taxes. Property taxes must be the most annoying part of buying a house. I mean haven’t you
spent enough money already? The real problem is understanding them and when you have to
pay. Today we have our legal expert Robert Arthur from the Robert Arthur Law Corporation
to explain property taxes. Most people have a misunderstand as to the way that property
taxes work. Property taxes generally run from January first to December 31st of each year
but they are set by the city in the early part of the year and collected at the middle
of the year on June 30th. So basically there are three ways of paying property taxes. Under
the mortgage that you arrange with the bank, the bank may collect a certain amount of monthly
payment to apply on the property tax every year. So those consist of what is called PIT
payments. The T being the tax component. The second way you can pay property taxes is paying
the full amount based on the tax bill when it falls due on June 30th. And the third option
that you have for property taxes is to pay them under the TIPP program with the city
which basically allows you to pay a monthly amount towards your property taxes in each
and every month that you occupy the property. So property taxes are an adjustment to the
purchase price depending on the time of year that you buy the property. The only time that
there is no property tax adjustment is you have a January 1st possession. Any other time
of the year you adjust for property taxes based upon the number of days in actual occupation
of the property. Alright so suppose you by your house on April the 30th. Typically because
the taxes are not due until June 30th, the actual amount of the property taxes will be
unpaid. Now in a situation say where the tax bill is $4800 the sellers portion for that
$4800 would be from January 1st to April 30th or 4 months. 4 months at $400 is amounting
to $1600 in total. So the property taxes form part of the closing costs when you take possession
of your property and depending on the time of year that you take possession, you either
will have a credit off of the purchase price because the seller owes a certain amount for
the number of days that they were in occupation of the property or you will have an additional
cost that you have to pay to the seller because they property taxes have already been paid.
Property taxes are assessed by the city based on the value of your property but there are
a couple of credits that you are in titled to see depending on wether you qualify. One
of the credits is a home owner property tax credit. It is a $700 tax credit that is given
to a home owner provided they are in occupation of the property as of December 31st in any
year. The other tax credit that you are in titled to is a seniors property tax credit
provided you are qualifying based on age. So property taxes are an important component
of your purchase and as you can see they are some what complex depending on the type of
payment schedule that is set up and time of year that you are buying so its best to consult
with a lawyer to make sure that your tax adjustment is correctly done. Thanks for watching our
video today. If you have any questions or ideas for videos that you would like to see,
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