Aerial view of a couple reviewing their real estate taxes during tax season.

Real Estate Taxes Vs. Property Taxes

4-Minute Read
Published on February 8, 2022
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When it comes to real estate taxes vs. property taxes, what’s the difference? In short, there is none. The IRS uses the term “real estate taxes,” but most people use “property taxes” to mean the same thing. Both of these terms refer to money paid to state or local governments because of levies on immovable land.

The only important distinction to make is that personal property taxes are different from real estate taxes and property taxes. Personal property taxes refer to movable properties, like the car you drive to work. These items are taxed differently from real estate.

Keep reading to learn more about how these taxes work and put an end to any confusion surrounding these real estate terms.

What Are Real Estate Taxes?

Real estate taxes are government-levied payments charged annually on immovable land, also known as real property. Immovable land is just that – land or property that you cannot physically move. It usually refers to buildings, homes or land plots.

These taxes are paid to local or state governments to fund schools, community projects, infrastructure or other undertakings. They can be paid directly to a local tax assessor or indirectly through your monthly mortgage payments via an escrow account.

Many people refer to real estate taxes as property taxes. In almost every case, these terms mean the same thing. The only time a distinction should be made is in the case of personal property. 

What Is Personal Property Tax?

Personal property tax is not the same thing as property tax. Personal property taxes are paid on movable items you own – like boats, vehicles, RVs or planes. The portion of your annual vehicle registration that’s based on the vehicle’s value is one form of personal property tax.

This tax is paid on the local or state levels. Some areas do not require you to pay personal property tax at all. Those that do generally require it be paid annually when you file tax returns. Personal property taxes usually fund public works projects, like schools and roads.

Property Taxes Vs. Real Estate Taxes Vs. Personal Property Taxes  

So are real estate taxes the same as property taxes? In most cases, yes. When referring to immovable assets, like a home, real estate taxes and property taxes are synonymous. Personal property taxes, however, are not. Here are a few ways these terms compare and contrast:

  • Property taxes and real estate taxes both refer to levies on immovable property, also known as real property.
  • Personal property taxes refer to levies on movable property, like boats, vehicles or planes.
  • The IRS uses the term “real estate taxes,” while consumers often use the term “property taxes.”
  • Personal property and real estate taxes are both paid at the state or local levels.
  • Personal property and real estate taxes both usually go toward funding community projects, like schools, roads or infrastructure.

A Venn diagram compares real estate/property taxes with personal property taxes.

How Much Are Property Taxes?

Property taxes vary from state to state (as well as local areas inside each state), but recent U.S. census data shows the national average is $2,471 paid annually.1 That breaks down to just over $200 per month from monthly mortgage payments going toward property taxes. Some states have property taxes lower than 0.5% of the home’s assessed value while others have rates higher than 2%.

A chart compares the states with the highest and lowest property taxes.

To see where your state stacks up, take a look at these estimates of property taxes by state. If you’d like the most accurate view of property taxes in your state, you can also use a local property tax estimator found on your state or county website. Because property taxes are calculated based on the home’s assessed value each year, you can also calculate your own estimate using this formula:

 

Property Taxes = Assessed Value x Tax Rate

A visual showing how property taxes are calculated using this formula: Assessed value x state tax rate = annual property taxes owed.

When paying property taxes, you may wonder about a common point of confusion: Are property taxes paid in advance or in dues? The answer is often both. If a tax year runs January through December, but property taxes are due in November, you will effectively be paying 10 months in dues and 2 months in advance.

Is A Vehicle Considered Real Property?

Vehicles are considered real property when they are attached to the ground, like a mobile home anchored using steel straps. In this case, the property is immovable and real estate taxes are paid.

However, if a vehicle is not attached to the ground – like the car you use to drive to work – it is not considered real property. Movable vehicles are considered personal property and are taxed as such. This includes mobile homes that are unattached to the land.

Visual showing when mobile homes are considered real property (when they are immovable) vs. when they are considered personal property (when they are movable).

Property taxes may feel like a burden, but they’re an important part of our communities. Without these funds, key community features like schools or libraries could suffer. With that said, there are still ways to lower property taxes while still maintaining good citizenship.

Wondering how else you may be able to lower your monthly mortgage payment? Take a look at today’s rates and see if refinancing could be right for you.

Sources:

  1. U.S. Census Bureau Quarterly Residential Vacancies and Homeownership, First Quarter 2021

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Victoria Araj

Victoria Araj is a Section Editor for Rocket Mortgage and held roles in mortgage banking, public relations and more in her 15+ years with the company. She holds a bachelor’s degree in journalism with an emphasis in political science from Michigan State University, and a master’s degree in public administration from the University of Michigan.