Welcome to Montgomery County. A beautiful County filled with great people, tons of things to do, a perfect location close to the hustle & bustle of Philadelphia, weekend hikes & winter skiing in the Poconos, & a short drive to the beauty, peacefulness & tranquility of the Jersey Shore. It really is a great place to call home. However, Montgomery County has one of those black sheep, also shared with its neighbors in the Commonwealth. Real Estate taxes. What were they thinking when they came up with this system?
Taxes are a necessary evil when buying real estate in Montgomery County, or anywhere for that matter. But what makes Montgomery County so special when it comes to real estate taxes? Well, let’s see.
There are three taxing authorities that collect real estate taxes; the local municipality, the county, and the school district.
The local municipality taxes, as well as the Montgomery County tax, run on a calendar year from January 1st to December 31st. However, the combined bill for the taxes does not come out until March and is due under the discount period in April?? Huh?
Add to that, the school taxes run on fiscal year from July 1st to June 30th. But, get this….the tax bill is not released until July and it is due under the discount period in August? Crazy? YES!
What does this mean to homebuyers in Montgomery County? If you are buying a house and making settlement in May, you will need to reimburse the seller for about 7 months of county and municipal tax, along with one month of school taxes as they most likely have already paid them in advance. If you are obtaining a mortgage, you will also need to set up an escrow account with your lender so that there is enough money in the account to pay for the tax bills when they become due. In this case, you will need to set up the escrow account with 5 months of local and county taxes and 11 months of school taxes as the bill will be due after only one mortgage payment made on the new loan. This is why we as real estate agents in Montgomery County always tell you that you will need about one year worth of taxes upfront for closing. Confused yet? Welcome to my world!!
So how are your real estate taxes used? The local municipality is paid to either the Township or Borough in which you are located. For those of you with properties on the township line, with property located in two jurisdictions, you pay your taxes to the township or borough where your master bedroom is located. Don’t ask why, that is the rule. Anyway, the local taxes are used for the general operations of the municipality including fire departments, police departments, parks and recreation, libraries, etc. In Montgomery County, the county tax is very similar as it also pays for the general operations of the county along with fire, police, ambulance, park and rec, county roads, etc. In the grand scheme of things, the combined local and county taxes are minimal.
However, the big Kahuna of real estate taxes is the school tax. This goes to the local public school system and can be quite substantial. It is usually 75% of your annual real estate taxes or greater!
So how are your real estate taxes determined? In Montgomery County, they come up with an assessed value of your property. No, this is not your market value, or even an appraised value. This is a value determined by an assessor of the County. They base this value on the square footage of the dwelling, the lot size, and the age. This assessment is then multiplied by the millage for your location and this determines your annual taxes. Generally, newer homes have much higher taxes than older homes. Homes with more land are much higher as well.
The assessment of your property is more an art than science. And sometimes, the artist (assessor) can paint a pretty bad picture, leaving you with a high tax bill. Well, you have the right to appeal your taxes. You must do so by August 1st of each year. You can locate more information on the procedure and get forms to do so here. I would also recommend you hire an attorney to help you present your case. I have a few I can recommend who will base their fee upon the amount of money they save you so contact me for information.
Although paying real estate taxes is a must, they are tax deductible. ANd since you are already paying for it, get out and enjoy those parks, open space, roadways, and libraries. And be sure to thank those police, fire and ambulance workers because if you look at what you pay in local taxes compared to the services that are offered by these great people, you could be compelled to make a donation directly to them.