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Taxes & Tax Law Changes
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Have you ever wondered what the difference is between the tax assessed value of a property, versus the fair market value? And how these two values compare to the appraisal value? You aren’t alone. Many sellers and buyers are confused about these values and how these values are determined and intertwined
First, lets look at the definitions for all three:
Tax Assessment: The amount that your county assigns to your home based on the value of the land, and the building itself. The value is calculated using an algorithm of sales in your neighborhood, and county based on the size of your lot, size of your home, number of bedrooms, bathrooms, and any other major upgrades (additions/decks/garages, etc). This calculated value determines the property taxes you will pay each year. The assessed value will changed based on how strong or weak the past year’s sales were, so typically it is a lagging indicator of the market, meaning it represents past values.
Market Value: The value at which a buyer is willing to purchase and the seller is willing to sell a home. This value is more subjective, and often linked to supply and demand in the specific area. Condition and upgrades will play a factor in the value, but ultimately the market value is the amount that both parties agreed to in a contract. A buyer may be willing to pay more for a home, if its in a desirable area with limited inventory. Similarly, if there is a surplus of inventory, or the home is located on a major road or has other challenging features, it may be sold at a lower value.
Appraised Value: This value is determined by an appraiser (usually 3rd party) to confirm or validate the market value for home buyer and/or a lender. The appraised value is generally calculated by using like kind properties, within a mile or so radius, looking specifically at sales for the previous three to four months. Adjustments are usually made up/down for more square feet, additional bedrooms, bathrooms, garage spaces and other upgrades. The appraiser may take supply and demand in account, but generally they are looking primarily at the condition/amenities of the home and how it compares to other sales in the immediate neighborhood.
So, while many buyers may not want to pay more than the “assessed value” of a property, the market value is usually higher. Additionally, a seller may order an appraisal before going on the market and refuse to sell for less than the appraised value, even if that may not be the correct market value. Tax assessment values and market values may vary depending on your neighborhood, county and state. While, tax assessments may be lower than market value by $50-$100K in some areas, the assessment and market values may be the same or higher in other areas.
If you have questions about assessed values, vs market or appraisal values, please contact us for more information!
Photo Credit: Newsday.com and epcrossing.org
Ever wondered how you fare compared to other home owners in Northern Virginia when it comes to property taxes? Owners in the towns of Herndon and Vienna dig the deepest into their pockets for the tax man, while those in Alexandria and Arlington make out the best in terms of tax rates. Check out the chart below to see where your jurisdiction ranks.
FY 2012-2013 Residential Real Estate Tax Rates
All rates are per $100 of assessed value and effective July 1, 2012
|City of Alexandria||$0.998|
|Town of Clifton||$1.075|
|City of Fairfax||$1.01|
|City of Falls Church||$1.27|
|Town of Herndon||$1.34 ($0.265 + Fairfax County Tax)|
|Prince William County||$1.209|
|Town of Vienna||$1.3171 ($0.2421 + Fairfax County Tax)|
Source: Northern Virginia Association of Realtors.
Buried in Friday’s signed, sealed, and delivered Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 was a provision retroactively approving the $5,000 tax credit for first-time home buyers in DC for 2010, and extending it through 2011 as well. Home buyers will remember that the credit, last approved as part of the 2008 stimulus bill, is usually approved late in the year and applied retroactively, leaving home buyers anxious about whether they’ll be entitled to the large credit.
This is a dollar-for-dollar credit against your federal income taxes owed (as opposed to a deduction, which would be worth less.) “First Time” buyers, for purposes of this law, are defined as those who purchased a home during the tax year and did not OWN IN DC in the twelve months prior to purchase. So if you owned in Virginia or another state and then bought in DC, you still qualify!
The maximum credit is for $5,000, or $2,500 if married filing separately. The credit begins to phase out when the modified AGI above $70,000 ($110,000 for married filing jointly) and phases out completely at $90,000 ($130,000 married filing jointly).
Recently, I was approached by someone who will soon be moving to the metro Washington, DC, area. Their first question: What are the property tax rates for the various jurisdictions? Having been unable to find a single source for such information, I set off in search of the tax rates for our area. So, faithful readers, here they are…the 2010 tax rates for the greater Washington, DC, metro area.
|Jurisdiction||2010 Tax Rate|
|Arlington County, VA||$0.865/$100 value|
|Alexandria City, VA||$0.978/$100 value|
|Fairfax County, VA||$1.09/$100 value|
|Fairfax City, VA||$0.955/$100 value|
|Falls Church City, VA||$1.24/$100 value|
|Loudoun County, VA||$1.245/$100 value|
|Prince William County, VA||$1.212/$100 value|
|Stafford County, VA||$1.10/$100 value|
|Montgomery County, MD||$0.683/$100 value|
|Prince George’s County, MD||$0.96/$100 value|
|Washington, DC||$0.85/$100 value|