Adulting: Real Estate Tax Edition

by - March 01, 2018

One of the realities I was not prepared for as an adult is the payment of taxes. I mean, I am aware that as an employee I am supposed to pay income tax but the other types of tax I was not prepared for.

An example of a type of tax I wasn't ready for was Real Property Tax. Technically I shouldn't be worrying about this because I don't have my own house but since I live at my parents' place I have taken it upon myself to pay for it.

Here are some lessons I learned about paying for this tax through the years:

1. Pay Regularly and On Time

Computation of my amount due back in the day.

My father used to be the one responsible for making these payments back when he was alive so when he passed away, I had no idea about the when, how and how much I had to pay for the tax on our house and lot. I think it was a good five years from my father's death that I got around to asking about this tax and I was shocked at how much I had to pay to make up for the years that we missed paying for this (roughly P44K in amount due with penalties/interest). When this happened, I promised myself that I would never let it happen again. It made too much of a dent on my budget!

2. If you can, pay early. 

I pay our taxes annually, which means I have to pay on or before January 31. By paying early you are given a discount on your tax due, which I take advantage of by paying early December when I get my year-end bonus from work. Quarterly payments can also be made earlier to get a discount.

3. You can pay quarterly but it's best to pay annually.

I prefer paying annually to schedule my budget in a way that I can get the discount and pay with my year-end bonus. You can pay quarterly but figuring out my budget and when the discount will apply on a quarterly basis is a bit too confusing for me so I stuck with annual payments.

4. You put your property at risk by not paying.

I have been told that if we fail to pay our Real Property Tax, the government has the right to auction off your property to offset the amount that you have not paid the government, plus penalties. I think this is a scary prospect and I feel lucky that after five years of delinquency, our property was not put up for auction. I refuse to let this happen to us so I am now making sure that we pay every year.

5. Your tax depends on the assessed value of your property.

Real Property Tax is computed as Rate X Assessed Value (Fair Market Value X Assessment Level). For me in the province, it's 1% multiplied by the assessed value of our house & lot. If you think that your tax is too high you can request for it to be reassessed. 

I have also been told that the value of your property can have a higher value if, for example, the place you live in becomes a city (from being a municipality). I don't know if this is true or not, but someone also told me that the assessment can also be affected by the type of furniture/appliances you have in your home. It can increase/decrease the value of your property.

Honestly, with the amount that we pay right now, I'm more inclined to owning a smaller house with a smaller lot area in the future if and when I do buy my own place. Not only would it mean smaller tax, but it would be less of a hassle to maintain (more on that in a future post). 

It is such a huge responsibility to be paying Real Property Tax because of the penalties and the auction that can happen if you neglect to pay. I think this is a true test of "adulting" to be able take responsibility for something like this. I have only started doing this for the past three years and I can say that this has been a big deal for me.

Do you pay Real Property Tax? If you have tips that you can share, please leave a comment!

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