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The Beginner’s Guide to Property Taxes on New Homes: Understanding Paying and Exemptions

Property taxes are a fundamental aspect of owning real estate, but many individuals find them confusing and overwhelming. In this article, we will delve into the world of property taxes, exploring their definition, importance, determination, and payment procedures.

By the end of this article, you will have a clear understanding of property taxes and be well-equipped to navigate the intricacies of paying them on a new home.

Understanding Property Taxes and their Basics

Definition and Importance of Property Taxes

Property taxes, also known as millage taxes or real estate taxes, are levies imposed on property by local governments, be it counties or municipalities. These taxes serve as a primary source of revenue for local governments, funding essential services such as education, road maintenance, and emergency services.

Property taxes are calculated based on the assessed value of a property, determined by local assessors.

Determination and Variation of Property Taxes

The assessed value of a property is a crucial factor in determining property tax. The assessor considers various factors such as the size, location, condition, and amenities of the property.

The assessed value is then multiplied by the property tax rate, which is set by the local government. It is important to note that property tax rates can vary greatly, with some areas having high rates and others having low rates.

The variation in rates is influenced by factors such as the financial needs of the local government and the overall property values in the area.

When and How to Pay Property Taxes on a New Home

Paying Property Taxes at Closing

When purchasing a new home, property taxes are often paid at the closing of the transaction. The buyer typically opens an escrow account with their mortgage lender, who collects a portion of the property taxes as part of the monthly mortgage payment.

During the closing process, the buyer is responsible for paying the first year’s taxes in advance.

Tax Schedule and Pro-rated Payments

After the initial payment at closing, property taxes are typically due twice a year. The due dates vary depending on the local jurisdiction, but they often fall on March 1st and September 1st.

It is important to note that property taxes are paid in advance, meaning the payment made in March covers the upcoming year, while the payment in September covers the remaining portion of the current year. In some cases, such as when buying a previously owned home, property taxes may have already been paid by the seller for the portion of the year they occupied the property.

In such situations, the buyer may need to reimburse the seller for the prorated portion of the property taxes for the remaining months of the year. However, when purchasing a newly constructed home, the buyer is typically responsible for the full year’s property taxes.


Understanding property taxes and their basic principles is essential for every homeowner. By comprehending the definition, importance, determination, and payment procedures of property taxes, individuals can navigate the complexities of homeownership more effectively.

Whether paying property taxes at closing or on an ongoing basis, being well-informed ensures that homeowners can fulfill their obligations and contribute to the betterment of their local communities. Remember, property taxes play a vital role in funding the various essential services that make our neighborhoods safe, vibrant, and thriving.

So the next time you receive that property tax bill, remember the significance behind it and the impact your contribution can have. With knowledge comes empowerment, and by understanding property taxes, you are well on your way to being a responsible and informed homeowner.

Property Taxes on New Construction Homes

Initial Property Tax Rates on New Builds

When it comes to new construction homes, the initial property tax rates may differ from those of existing properties. This is because the property tax rate is often determined by the value of the land and the value of the house.

In the case of new builds, the land is typically considered unimproved until the house is completed. As a result, the initial property tax rate on new construction homes may be based solely on the value of the land.

In some areas, local tax authorities may apply a higher property tax rate to unimproved land, as the potential for increased property value exists once the house is built. However, in other jurisdictions, the property tax rate for unimproved land may be lower, reflecting the fact that the land does not currently contribute to the tax base in terms of housing or other improvements.

Once the house is completed, the property tax rate is usually adjusted to reflect the increased value of the improved land. This adjustment is typically based on a reassessment by the local tax assessor, who takes into account factors such as the size, construction quality, and overall market value of the completed home.

Lender’s Approach to Property Taxes on New Construction

When it comes to property taxes on new construction homes, mortgage lenders take a proactive approach to ensure that taxes are properly accounted for. This is because property taxes are essential for maintaining the value of the collateral (the home) that secures the mortgage loan.

During the construction process, lenders may assume a certain property tax rate for budgeting purposes. This assumed rate is often based on the current millage tax rate in the area where the property is being built.

Once the house is completed and the actual property tax rate is determined, the lender will adjust the escrow account to ensure that the correct amount is being collected from the homeowner. It is worth noting that in some cases, lenders may perform a full-value assessment of the property once it is completed, taking into account the value of both the land and the house.

This assessment helps ensure that the property taxes being collected are accurate and in line with the actual value of the property. This approach provides a more accurate representation of the homeowner’s property tax obligations and contributes to a fair and equitable system.

Calculating Property Taxes on a New Home

Using Property Tax Calculators

Calculating property taxes on a new home can be a complex process, but thankfully, there are resources available to simplify the task. Property tax calculators, often provided by state or county tax authorities, can help homeowners estimate their property tax obligations based on various factors such as property value, assessed value, and local tax rates.

To use a property tax calculator, homeowners typically need to input specific details about their property, such as its location, size, and any unique characteristics that may impact its value. Once the necessary information is entered, the calculator will provide an estimate of the property tax amount based on current tax rates.

These calculators can be an invaluable tool for homeowners, allowing them to budget for their property tax payments and gain a better understanding of how changes in property value or tax rates may impact their obligations. It is important to note that property tax calculators provide estimates only and that the actual tax assessment may differ slightly.

Considerations for New Build Property Taxes

When considering a new build, it is crucial to take into account the potential impact on property taxes. As new developments take shape, the surrounding area may become more desirable, leading to an increase in property values.

This increase in value can, in turn, lead to higher property taxes. Homeowners should be prepared for the possibility of increasing property taxes in the future.

While the initial property tax rate may be based solely on the value of the land, once the house is completed, the assessed value will include both the land and the improvements. This reassessment can result in higher property taxes, especially if the area experiences significant development and improvements over time.

It is important to factor in the potential for increasing property taxes when determining the affordability of a new build. Homeowners should consider the long-term financial implications of rising taxes and ensure that they have a plan in place to handle any potential increases.

Consulting with a real estate professional or financial advisor can provide valuable insights into this aspect of homeownership and help homeowners make informed decisions.


Navigating property taxes on new construction homes requires a thorough understanding of the initial property tax rates, the lender’s approach to property taxes, and the methods used to calculate property taxes. By familiarizing themselves with these topics, homeowners can confidently navigate the process and anticipate any potential changes in their tax obligations.

With the help of property tax calculators and a thoughtful consideration of long-term affordability, homeowners can make informed decisions and ensure a smooth transition into their new home.

Property Tax Exemptions and Eligibility

Groups Eligible for Lower Property Tax Rates

While property taxes are a necessary part of homeownership, certain groups may be eligible for lower property tax rates or exemptions. These groups often include seniors, veterans, and individuals who use their land for agricultural purposes.

These exemptions are designed to provide financial relief to those who may face challenges in meeting their property tax obligations. Seniors are one group that may qualify for lower property tax rates.

Many jurisdictions offer property tax exemptions for homeowners who are of a certain age, often 65 or older. These exemptions can vary in terms of eligibility requirements and the extent of the tax relief provided.

In some cases, seniors may be eligible for a freeze on their property tax assessment, ensuring that their tax liability remains stable as their home appreciates in value. This can be particularly beneficial for seniors living on fixed incomes who may struggle with rising property taxes.

Veterans of the armed forces may also be eligible for property tax exemptions. These exemptions are a way of showing appreciation for the sacrifices made by veterans and recognizing their service to the country.

The eligibility criteria for veteran property tax exemptions may vary depending on the jurisdiction and the nature of the veteran’s service. Some jurisdictions require a minimum period of active duty or an honorable discharge to qualify for the exemption.

These exemptions can provide significant savings for veterans, reducing the burden of property taxes on their homes. In addition to these groups, individuals who use their land for agricultural purposes may be eligible for special property tax treatment.

Agricultural land is often assessed at a lower rate than other types of land. This recognizes the importance of agriculture to the economy and the need to support farmers and ranchers.

However, it is important to note that specific eligibility requirements may apply, such as minimum acreage or evidence of active agricultural use. Property owners should consult their local taxing authority or a realtor experienced in agricultural exemptions to determine their eligibility.

Application and Approval Process for Exemptions

To secure a property tax exemption, homeowners must typically follow an application and approval process. The specific steps involved may vary depending on the jurisdiction and the type of exemption sought.

Homeowners should consult their local taxing authority or a qualified realtor to understand the requirements and procedures in their area. The application process usually begins with gathering the necessary documentation to support the homeowner’s eligibility for the exemption.

This may include proof of age for senior exemptions, discharge papers for veterans, or information on agricultural usage for agricultural exemptions. Homeowners may also need to submit a completed application form, which can usually be obtained from the local taxing authority.

Once the application is submitted, it goes through a review and approval process. The local taxing authority reviews the application and verifies the homeowner’s eligibility for the exemption.

This may involve contacting the homeowner for additional information or conducting an inspection of the property in the case of agricultural exemptions. The approval process can take some time, so homeowners should be prepared for a potentially lengthy wait before receiving a decision.

If the exemption is approved, the homeowner will begin to benefit from the lower property tax rate or the exemption from property taxes altogether, depending on the type of exemption granted. It is important to note that property tax exemptions may need to be renewed periodically, so homeowners should stay informed about any renewal requirements to ensure that they continue to receive the tax relief they are entitled to.


Property tax exemptions can provide much-needed relief for certain groups of homeowners, such as seniors, veterans, and those engaged in agricultural activities. These exemptions help ease the burden of property tax obligations and recognize the contributions and challenges faced by these individuals.

By understanding the eligibility requirements and following the application and approval processes, homeowners can take advantage of these exemptions and enjoy the financial benefits they provide. Consulting with local taxing authorities and experienced realtors can provide valuable guidance and support throughout the process.

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