Should I pay my property taxes by the end of the year? That all depends…
The general rule is to always take a deduction (pay your property taxes) every year. However, if the total of your itemized deductions is below the standard deduction available to you, “Doubling-up” on your property taxes can afford you a way to keep your standard deduction. Doubling up means paying two years of property taxes at once and then skipping a year.
For example: Suzii is a single taxpayer whose actual property taxes are $6000. She does not donate to charity. As a single person, her standard deduction for 2015 is $6,300. This means, if she has no itemized deductions, she can still reduce her taxable income by $6,300. If she pays her taxes in December, she loses that deduction because her property taxes are less than the standard deduction.
However, if she pays her 2015 taxes in January 2016 and her 2016 taxes by December 2016, her itemized deductions on her 2016 return will exceed the standard deduction and she will get the benefit of an additional reduction of $5,700.
If funds to pay your taxes are held in escrow by your mortgage company, make sure to instruct the company on when they should be paid. Every year check to see if the equity in your property exceeds 20% of the home’s value. Once you reach this mark, the mortgage company can no longer require you to escrow funds and must release any money held in that account to you. You will also by released from making mortgage insurance premium payments.
When purchasing a new home, do not depend on the title company to file your homestead exemption with the appraisal district. Always verify that you are receiving that exemption, as this will affect your property taxes.
As part of the homestead exemption, any 65 year old home owner who lives in the residence, may have their property taxes frozen, If the qualifying homeowner dies, the surviving spouse may continue to receive the exemption if the surviving spouse is age 55 or older at the time of death and lives in and owns the home. This requires an application for the exemption to continue.
There are other exemptions available to disabled persons and veterans, which may also help as you assess the best way to pay your property taxes. For more on these topics visit:
http://comptroller.texas.gov/taxinfo/proptax/exemptions/disabledvet_faq2.html
Keep in mind, that no matter how you choose to finance your property taxes, they are an important part of home ownership and it pays to know all the facts in order to best utilize your money. Have questions? Contact me, Debra Newby Watkins, CPA at 512 484 8016.