Why Do I Have to Pay Property Taxes and Where does that Money Go?

my-property-taxes-are-late

We’ve had to field a lot of questions from homeowners over the past few years, ranging from concerns about foreclosure to estate planning.  And while any of these questions relate to specific circumstances facing Utah homeowners, many turn out to be hypothetical. Hypothetical, but no less warranted. But there’s one question facing many Utah residents which is far from hypothetical: where do my property taxes go?

Understanding your property taxes should be simple enough. After all, every single American homeowner has to pay them. They’re as unavoidable as your mortgage payment. And they can sometimes seem as confusing as they can seem unnecessary.

But the truth is, they’re neither.

Property Taxes In Utah

One of the reasons why property taxes can seem so confusing in Utah is due to the fact that they’re not universal. The amount doesn’t just vary from county to county. They vary from property to property.

Utah reportedly has the 11th lowest property tax rates of any state in the country. But Utah also has a cost of living that’s higher than over half the states in the country. What does that mean for homeowners?

The median cost of a home in Utah is currently well over $350,000 as of August 2020. That’s across all 29 counties. In fact, Utah County alone is just shy of $365,000. What that means for you as a homeowner is that the increase in property value will mean an increase in what you pay in property taxes.

Property tax is calculated by the taxable value of a property divided by the current year’s tax rate per neighborhood. And we probably don’t have to tell you that neighborhoods can vary dramatically in Utah. To illustrate, you can find a handy list of estimated Utah property tax rates based on median property values per county for 2020 located here.

Let’s look at some of those differences a little more closely. Summit County had a reported property tax rate of 0.43 percent for 2020 with a median home value of $558,000, totaling approximately $2,398 an average homeowner might expect to pay in property taxes. San Juan County, on the other hand, had a considerably higher tax rate of 0.95 percent. But with a much lower median house price of $136,600, property taxes only averaged $1,297 in 2020. And just for the sake of comparison, Salt Lake County reported a property tax rate of 0.71 percent with a median home price of $260,700—or roughly $1,850.

In short? The higher the property value, the lower the property tax rate; and vice versa. Ideally this creates a level playing field for all neighborhoods throughout Utah, whether it’s a developing communities or an already prosperous one. But where exactly do your property taxes go?

What Happens To My Property Taxes In Utah?

What Happens To My Property Taxes In Utah?

Much like the rest of the country, property taxes in Utah generally go to a city or town’s general fund, which are then used to pay for necessary public service infrastructure—including schools, road and highway repair, police and fire protection, transportation, parks and recreation, construction and emergency services.

Much like the rest of the country, Utah has developed a public infrastructure model which includes privatization as a portion of its funding. But privatization isn’t always labor or cost effective. There’s still fundamental services which will need sourcing from public funds in order to achieve a functional and fully modernized infrastructure.

Those funds aren’t financing your elected officials. They’re directly financing your community, and the benefits are all around you. Utah’s school system was ranked number 10 in the country recently by US News & World Report, while its public infrastructure was rated number 3. While property taxes in Utah might seem excessive, they’re actually much lower than the national median average.  In fact, they make up less than 20 percent of Utah’s annual public fund revenue. And that’s in a state that’s included among the top ten of the highest property values in the country.

How Are Property Taxes In Utah Calculated?

Utah state law dictates that property taxes are calculated through a board of public assessors in each county responsible for the valuation of all residential property. Typically, the appraisal process occurs once every five years; although if sales have suddenly increased or declined sharply in a short period of time, it can be potentially multiple times in that period.

Property taxes are calculated on fair market value, with residential property receiving a 45 percent exemption from taxation. That means that only 55 percent of your marketable value will ultimately be taxed based on a percentage. The percentage varies with each county, but it’s typically less than one percent. As we indicated, the higher your property value, the lower the tax rate. Low property values tend to be taxed at a higher rate to ensure there is a fair and equal representation from all counties in Utah.

What Happens If I’m Behind On My Property Taxes?

Failure to pay property taxes can result in a lien being placed on your property, and it’s as common in Utah as the rest of the country. Approximately six percent of all property tax liens wind up in foreclosure, according to the National Tax Lien Association, with over $14 billion in property taxes remaining unpaid.

Utah grants a five year tax redemption period, but don’t assume that means an outright dismissal of unpaid property taxes. What that means is that you have up to five years to pay any and all back taxes owed from previous years, including late penalties. Failure to do so will often result in your home being entered into a public property tax auction; which in Utah, occurs in early May.

Liens can be placed on your home for non-payment of property taxes even prior to that five year redemption period. However, arrangements can be made with state and county tax commissions under certain conditions. If you anticipate being late with just one property tax payment, contact the Utah State Tax Commission immediately to discuss ways in which you can avoid the lien process and save both your home, your credit and your peace of mind.

What About Property Taxes On A Home I Don’t Own?

If you’re living in a property you don’t own that happens to be tax delinquent, there’s a very good chance you can be evicted as a result. It’s not entirely unheard of; but it’s more frequent to hear of homeowners allowing tenants to pay off back taxes for a reduction in monthly rent. But while property taxes are deductible for homeowners filing income taxes, they can unfortunately not be claimed by tenants on a return.

There’s an interesting property statute in Utah called the Adverse Possession Law, however. If you’ve lived on a property you don’t own for at least seven years and have both made notable improvements to the home and are willing to pay property taxes owed, you could potentially be eligible for ownership of the property through title transfer. Keep in mind that the process of obtaining adverse possession of a home can be a long and drawn out process, and one you should only discuss with a qualified real estate attorney.

What If I Can’t Pay My Back Property Taxes?

If you can’t pay property taxes owed in Utah, there’s a few options you may want to consider.

If your personal income was less than $34,167 in 2019 or over the age of 66, you may qualify for a Homeowner Low Income Abatement from the Utah State Tax Commission. For more information and to contact your own county office for an application, please click here.

The other option is to sell your home outright, and salvage both your credit and your eligibility for financing future homes with the proceeds. At Gary Buys Houses, we’ve been helping thousands of Utah homeowners who are tax delinquent find immediate relief by purchasing their property in as little as 3 – 5 business days. The process is prompt, fair and guaranteed; and you’re under no obligation to sell your home if it’s not the most appropriate option for you.

Property taxes in Utah may be an unavoidable part of life, but penalties don’t have to be.

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