Owning property in Pennsylvania can be an excellent thing for an investor. You're more focused on the bottom line than you are on the sunshine and fun things to do. However, you'll have to consider on property taxes.
Whether you own an apartment building or a house, it's crucial to realize that property tax is a significant expense within your financial picture.
You probably have many questions, such as when to pay it, how it's calculated, and what methods there are to lower the cost. Our comprehensive guide will help you understand Pennsylvania property taxes. In fact, you'll learn about the essential dates, calculations, rates, and exemptions. Let's get started!
Understanding Property Tax Bills in Pennsylvania (They're Used for School Districts and More)
Everyone who owns property will have to pay property taxes in this state. The municipalities, counties, and local authorities will assess them. Therefore, the tax levies vary based on your address.
Everything is based on the house's assessed value, and a county or municipality assessor will determine this amount. Likewise, you'll pay based on the home's current market value (fair market value), which varies.
The school district will help to determine the price you pay in property tax rates.
How Many Times Do You Pay Property Taxes in Pennsylvania?
Pennsylvania property taxes are due on March 31 every year. Many people have them taken out of escrow each month, so they don't have a remaining balance at the deadline.
Consequences of Late Payments
If you don't pay your property taxes by the 31st of March, the county assessor will add interest and other charges to the principal amount. These are called "additions," and they accrue at 1.5 percent every month, starting April 1 and going through January 1 of the next year.
Those who still haven't paid property taxes by January 1 of the following year will have these penalties to deal with:
- Delinquency registration
- 15 percent maximum addition added to the principal
- Liens filed
- City could start selling the house at a sheriff sale
How to Pay a Property Tax Bill in Pennsylvania
Once you buy a property, you could set up the real estate tax bills to get paid in escrow. However, if you already own the property and don't know if you're paying them, look at your mortgage statement.
How Much Is Property Tax in Pennsylvania?
Your property taxes will likely vary when compared to any other house. The county goes by the assessed value of the place, and the state uses CLR (common level ratios). This is the ratio of assessed value to your current market value. You can find this on the state's government website through the Tax Equalization Board, which uses sales data.
Many times, the assessed value is equal to the current market value of your property. However, some counties use a percentage of the current market value for an assessed property.
Though you don't get that information when the property assessment happens, you can easily find it.
How Is Property Tax Calculated in Pennsylvania?
The local tax authority determines Pennsylvania property tax rates based on the revenue needs of the county. You'll go by millage rates. One mill equals $1 of property tax, which is for every $1,000 of assessed value.
Each county has its own system to determine assessed values. Therefore, mill rates in one county aren't comparable to those in another. Plus, you'll need to know the real estate tax rates in your county.
For example, Allegheny County has one of the highest at two percent, though Adams County is at 1.57 percent, and York County is at 1.97 percent. Likewise, the City of Philadelphia has a tax rate of 1.3998 percent of the assessed property value, but those in Lancaster County pay 1.68 percent.
It's also important to note that the county might not reevaluate property values each year. Instead, it might be on a cycle.
Though it's hard to know how to calculate property taxes in the state, here is the formula: You'll multiply your home's assessed value by the local millage rate. However, millage rates do vary between municipalities and counties.
How Can I Lower My Property Taxes in Pennsylvania?
Knowing how property taxes are calculated is the first step. However, you also want to save money to keep costs low while boosting your rental income. Here are a few of the exemptions and programs available to help:
Homestead or Farmstead Exemption
Pennsylvania homeowners who own a house and use it as a primary residence could be eligible for the homestead/farmstead exemption. It will reduce the taxable portion of the property's assessed value. Overall, it was started to make each school district less reliant on property taxes, also offering relief to people with higher tax bills.
As a landlord or investor, you won't get this exemption, but it's important to know what it is and does.
You could get a one percent discount if you pay your PA property taxes before the 28th or 29th of February. Typically, the Pennsylvania Department of Revenue will mail real estate tax bills in December for all property owners.
The Property Tax and Rent Rebate Program is set to benefit eligible Pennsylvanians who:
- Are over 65 years old
- Have disabilities and are 18 years or older
- Are widows/widowers who are 50 years of age or older
There's a strict income limit of $35,000 per year if you're a homeowner and $15,000 per year if you're a renter. Likewise, half of your social security income is excluded, according to the Department of Revenue. The standard rebate maximum is $650, but you can find supplemental rebates, which go up to $975.
When was the last property assessment of your home? You could lower your real estate tax by having it reassessed.
Important Propositions for Real Estate Investors in Pennsylvania
The most recent proposition for property tax in Pennsylvania is the property tax/rent rebate program. Overall, the state is making it easier to qualify for assistance, though it's uncertain who will benefit. In most cases, investors cannot get the rebate because they don't live in the home.
Owning property in Pennsylvania is a worthwhile investment, but you have to understand all the implications that come with it.
Navigating the maze of Pennsylvania property taxes is essential if you wish to protect yourself and safeguard your investment. This means understanding how to calculate the bill, how often you pay it, and knowing how to potentially save money.