Property Taxes

Property taxes on real estate (land, houses, buildings) are typically assessed at the county level.  Taxes on real property generate money which is typically used for local government functions, such as schools.  The dollar amount of tax that is assessed is generally based on the value of the property.

What differentiates real property taxes from income taxes is that property taxes on real estate are not “personal” to the owner of the property.  If property taxes on real estate are not paid, the only remedy that the taxing authority has is to foreclose (tax lien sale) on the real estate; the taxing authority cannot come after the owner of the property for the unpaid tax.  If the owner of the real estate wants to keep the property, they will want to pay the property tax to prevent the real estate from going into foreclosure.  However, if the real estate is lost to a foreclosure initiated by a lender, then the owner will have no further liability for unpaid property tax.  The taxes follow the real estate, and whoever ends up with the real estate after the foreclosure, whether that is the lender or someone else, will have to pay the taxes to avoid facing foreclosure by the taxing authority. 

In a deed-in-lieu of foreclosure situation where a property owner gives title to the real estate back to a lender, the lender will pay the property taxes to protect its own interest in the real estate it now owns.

In a short sale situation, the taxes will be paid during the escrow process to ensure that the buyer does not end up with a property with tax liens recorded against it.

The above applies generally to property taxes on real estate.  Most states have personal property taxes, which are taxes paid to the state or county for personal property like cars, business equipment, and the like.  The information above does not address personal property taxes.