Unit 18 Flashcards
Exemptions From Property Taxes.
* Immune properties
* Exempt properties
The owners of certain properties are relieved of the obligation to pay property taxes. Others are exempt.
Immune Properties
Immune properties are city, county, state, and federal government properties.
* Examples of immune properties include county courthouses and military facilities. Immune properties also include special properties such as municipal airports that have been made immune by statute or ordinance. Immune properties are not subject to taxes.
Exempt Properties
Exempt properties include property belonging to churches and non profit organizations. Exempt properties are subject to taxation, but the owner is released from the application.
Partially Exempt Properties
Partially exempt property is subject to taxation, but the owner is partially relieved of the burden. For example, all owners of Homestead property are granted a partial tax exemption. For this reason, one cannot always regard the assessed value of a property as the taxable value of that property. The taxable value of a property is not known until existing exemptions are subtracted from the assessed value. Taxable Value (nonexempt assessed value) is determined by beginning with assessed value and subtracting appropriate exemptions.
CALCULATING PROPERTY TAXES
Save Our Homes (SOH)
Save Our Homes (SOH) amendment to the Florida Constitution caps how much the assessed value of homesteaded property may increase in a given year.
The just value of homestead property may be increased by the lesser of:
* 3% annually based on the assessed value of the previous year; or
* The percentage change of the Consumer Price Index (CPI) for the preceding year.
9 mills = ? in decimals?
Answer: .009
Formula: Annual Property Taxes Due
Taxable value × Tax rate = Annual property taxes due.
* Example: Using the tax rate of 10 Mills for a home assessed at a $180,000 that has qualified for homestead tax exemption, the calculation of the county property taxes (non school taxes) is as follows:
* $180,000 assessed value - $50,000 Homestead exemption = $130,000 taxable value × .010 tax rate = $1,300 property taxes due
Street Paving Assessment
Street paving assessments are calculated on a front foot basis. Lot dimensions are written with the front footage first and then the depth of the lot.
* For example.
The front feet would be a 110 for a lot that measures 110’ by 300’. The local government will typically bear a portion of the cost of the improvements. For example, 40% of the total cost, leaving the remainder 60% to be paid by the property owners. When calculating a street paving assessment, it is important to remember that property owners are only charged to the middle of the street (or 1/2 of the total property owners share). This is because the property owner across the street will also be charged special assessment. The property owner’s across from one another split (each pays 1/2) the cost of the assessment.
Street Paving Assessment
Example
The city is paving the streets in a neighborhood. The city will assume 30% of the expense. The city has approved a bid to pave the street at a cost of $24 per linear foot. How much is the special assessment for a lot that measures 100’ by 125’ ?
* 100 front feet × $24 per linear × × 70% ÷ 2 neighbors = $840 for each to pay.
Tax Certificate Auction
Tax certificate sale
A tax certificate sale is not a sale of real property, nor does a tax certificate give the certificate holder a direct means to acquire a property at the auction. Any qualified person is entitled to bid for the tax certificate on any property. Instead of bidding in dollars, investors bid interest rates at the auction. Starting at 18% and going down. The bidder, who is willing to accept the lowest interest rate, is issued the tax certificate.
FEDERAL INCOME TAXES
Mortgage interest
Property tax
Mortgage interest is deductible. Interest paid on a mortgage loan on a principal, and second home is deductible (certain limitations apply).
Property tax is deductible. The annual property taxes paid on principle and second homes are deductible (up to $10,000).
Straight-Line Method
Depreciation is calculated using the straight-line method. An equal amount of depreciation is taken annually over the useful life of the asset. The Internal Revenue Service ( IRS ) has currently established useful asset life as 27.5 years for residential rental property and 39 years for nonresidential income-producing property.
Formula: Straight-Line Method
*Total cost to acquire property - value of the land = depreciation basis
*depreciation basis ÷ useful life (27.5 or 39 years) = annual IRS depreciation deduction
Example: In 2019, a non-residential real estate investment property was purchased for $2,350,000 dollars with a land value of $250,000. What is the amount of the yearly depreciation deduction?
Answer: ($2,350,000 - $250,000) ÷ 39 = $53,846.
