What Is the Difference Between Real Estate Taxes and Property Taxes?

March 20, 2020

While the terms real estate taxes and property taxes are often used interchangeably, they actually refer to different types of taxes. Learn more about how each of these items may affect you or your business, then seek advice from experienced Encino tax advisors.

The Facts About Real Estate Tax

Real estate taxes, sometimes mistakenly referred to as property taxes, are the taxes you pay on structures that stay in the same place. For example, you must pay real estate taxes to your local tax authority on land, homes and/or commercial buildings you own. Often, these taxes are rolled into your monthly mortgage payment and held in escrow, then remitted by your mortgage company.

In California, property taxes average between 1.1% and 1.5% of the assessed value of the home. For example, if your home is worth $400,000, your annual property tax bill may range from $4,400 to $6,000. At income tax time, your Encino tax consultants can help you deduct all or part of your real estate taxes from your taxable income in accordance with state and federal laws.

Understanding Personal Property Tax

Movable items, including vehicles, boats, planes, recreational vehicles and mobile homes, are subject to personal property tax. These charges are added to your registration or license fee when you register personal property. For example, part of your car registration fee includes the personal property taxes you owe on the vehicle.

In general, the property tax assessment in California is 1% of the value of the item in question. For example, if your car cost $10,000, you would owe $1,000 in personal property taxes on that vehicle annually. Like real estate taxes, property tax can be deducted from your annual income tax return.

Both your real estate and personal property taxes may affect the amount of income tax you owe. You can ensure you do not overpay or underpay your annual taxes by working with qualified Los Angeles tax preparation services.