How to Calculate Taxes on New Home Purchase
A new home generates new taxes and reduces others.
When you buy a new house, it has both one-time and far-reaching tax implications. At the time of closing, most communities levy taxes on the value of the real estate that changes hands and some also charge a tax on the value of any mortgage that gets charged. Over time, you'll have to pay property tax on your home's value, but you may also get some tax savings through itemized income tax deductions.
Property taxes are usually tied to a property's value as estimated, or assessed, by your county or community's assessor. The way property taxes are calculated varies by state and community. In California, a house purchased for $300,000 would be assessed at the purchase price and at the state's rate of 1 percent plus whatever else the city or county add on. If the combined rate
is 1.3 percent, the property taxes would be $3,900. In West Des Moines, Iowa, in Polk County, a $300,000 house's value would be reduced by 54.44 percent, then the remaining value would be taxed at 3.685 percent, less a small homestead tax credit for a total tax of $4,857.94. This is an effective rate of 1.62 percent. The best way to estimate your property taxes is to ask your real estate agent or contact your county's tax assessor.
As of September 2012, 37 states plus the District of Columbia have transfer taxes that get charged when a property changes hands. As with property taxes, transfer taxes are all over the board. A $300,000 house carries $3,840 in transfer tax in Washington before local taxes, $990 in West Virginia before local taxes, $900 in Wisconsin and $0 in Wyoming. In many parts of the country, though, the seller pays this tax.
Mortgage Registration TaxSource: finance.zacks.com