Do renters pay property tax?
If you are a renter and wondering if you have to pay property taxes, the short answer is no, not directly. Tenants do not pay property taxes directly to the government in the same way that owners do, but you are still, in a way, paying property taxes, let me explain.
What is Property Tax
Property tax, sometimes referred to as millage rate, is a real estate ad valorem tax, (in simpler terms, this is a tax that is usually based on the assessed value of the personal property or real estate) that is set by the local government and is expected to be paid by the property owner every year.
The assessed value may equal what the property would sell for on the open market depending on local tax rules or a percentage of that market value. This means that the exact price can fluctuate from year to year depending on many factors.
Property taxes are a large way that local governments get their funding. Every person who owns any property pays these taxes. Property tax and the type of property obligated to pay this tax vary from one jurisdiction to another.
How is property tax used by the local government?
The local government collects property taxes and uses them to provide and fund a wide range of services, including:
- Maintaining infrastructure
- Road and highway construction
- Paying public workers
- Health services
- Many other services
A Quick Look at Property Taxes by State
Recent property tax figures published by WalletHub’s 2021 findings showcase the average annual property taxes in different states around the country.
Here’s a snapshot:
- New Jersey – $5,419
- Texas – $3,907
- Pennsylvania – $3,442
- California – $1,644
If you’re in New Jersey and wonder why your rent is so high, taxes could be to blame.
So, do Renters Pay Property Taxes?
Yes, but not directly. Renters indirectly pay property tax through their rent. But it is the legal responsibility of the property owner to pay the property taxes to the government. Charging rent is how landlords ensure they can pay the property taxes and any other expenses that come with owning an apartment building or home. But how is that calculated?
How Your Rent is Calculated
Many factors are considered when determining the price of rent, and property tax is one of those factors. After all, most landlords do not want to lose money renting out a property. And to avoid doing that, they have to consider all of the costs that go into property ownership and upkeep. So, when you pay your rent, you are in part paying for your landlord’s insurance, their maintenance fees and utilities for the property, HOA fees, and you guessed it, property taxes.
When looking for apartments, you may notice that rent is usually about the same price for apartments of similar size and location. This has a lot to do with the local property taxes. So if your rent seems high, chances are that’s because of high property taxes in the area.
The More you Know
Which brings us back to the question: Do renters pay property tax? No, renters do not directly pay property tax, owners do. So as a renter, you don’t have to worry about the government coming after you for unsubmitted property taxes for the apartment you rent.