TAX ACCOUNTANTS & ADVISOR
In the United States, housing accounts for about 30% of household assets, while the value of stocks held directly or indirectly by households only accounts for 25% of their total assets. According to statistics, since 1995, US housing sales revenue has reached 150 billion U.S. dollars each year. The real estate industry has a broad space for development and has created a solid tax source for taxation.
The real estate tax in the United States is levied in the name of a property tax. The tax objects are mainly residential buildings. More than 95% of the income is levied by local governments, and the tax laws are formulated by the states.
The taxpayers of real estate tax in the United States are natural and legal persons who own real estate. This includes residential owners and residential renters, but does not include residential tenants. For example, according to the California Real Estate Tax Law, all local real estate owners are real estate taxpayers.
The United States real estate tax is subject to housing, and the assessment of the housing is the basis for taxation. In the actual appraisal process, the appraisal and market prices often differ greatly. This is mainly because the local government requires that the value of large real estate be underestimated in order to attract foreign capital. Generally, the valuation is only set at 3/4 or even half of the market price. For example, the California Real Estate Tax Law stipulates that the taxation basis of real estate tax is the market price of real estate, but only 40% of the market price determined by the local government specializing in real estate valuation department is used as the tax price.
The tax rate of real estate tax is determined by the local government according to the needs of budgets at all levels each year. The real estate tax that should be levied on the budget and the total taxable value of the house change every year, so the real estate tax rate changes accordingly every year. The specific procedure for determining the tax rate is: the municipal and town committees pass the budget, and the governments at all levels determine the amount of real estate tax based on various budget revenues and total expenditures, and then determine the real estate tax rate based on the assessed tax value of the house.
The calculation formula of the tax rate is: the real estate tax levied on the budget ÷ total real estate taxable value = real estate tax rate.
The U.S. real estate tax rate varies from place to place, but the level of the tax rate is subject to certain restrictions, because the federal law stipulates the maximum amount of tax on property (mainly real estate). After the property appraisal is formally approved by the local legislature, it becomes the local statutory tax base. Accordingly, two forms of tax rates are formed. One is the nominal tax rate, which applies to valuation; the other is the actual tax rate, which applies to market prices. Due to the different valuation ratios in different regions, there are also large differences in tax rates in different regions. For example, the real estate tax rate in Jersey City, New Jersey is 4.125%. The tax rate in Libao City is 2.18%, of which the real estate tax rate levied by the city government is 0.936%; the real estate tax rate levied on behalf of the county government is 0.276%. New York City’s property tax is the most complicated, and the city divides houses into four types. The first type, housing where one to three families live together, has a nominal tax rate of 10.694%, and the actual tax rate is 0.85%; the second type, residential housing where multiple families live, the nominal tax rate is 10.552% , The actual tax rate is 4.75%; the third type, public facilities, the nominal tax rate is 7.702%, the actual tax rate is 3.47%; the fourth type, commercial buildings (such as shops, warehouses and office buildings, etc.), The nominal tax rate is 10.608%, and the actual tax rate is 4.77%. There are nearly 1 million buildings in New York City with a total value of nearly 400 billion U.S. dollars. Approximately 7.5 billion U.S. dollars in property taxes are collected each year, accounting for 1.9% of the total value of houses.
U.S. local governments have stipulated some tax deductions and exemptions, mainly for self-occupied homes. This is achieved by reducing the tax base or underestimating the value of the property. There is also a way to reduce or exempt real estate tax, that is, when the real estate tax exceeds a certain maximum value, the taxpayer can get the corresponding state personal income tax credit or cash compensation from the state government. Different states in the United States have different regulations on real estate tax relief. This article uses California as an example. California's regulations on property tax deductions and exemptions mainly include (1) taxpayers' main self-occupied residences can be exempted from the property tax of $7,000; (2) disabled veterans can be exempt from the property tax of up to $150,000; (3) churches Houses owned by related non-profit organizations such as schools, hospitals, libraries, etc. can be exempted from real estate tax; (4) For seniors over 55 years of age, after selling their own old homes, they can purchase them within two years. In the case of a new house for self-use, as long as the price of the new house is not higher than the selling price of the original old house, the property tax can be paid according to the tax amount of the original house. In principle, taxpayers can only apply once in their lifetime; (5) The transfer of main self-use residences between parents and children, regardless of whether it is sold, gifted or inherited, does not need to be revalued after the transfer, and is levied according to the real estate tax before the transfer. In principle, this kind of concession is limited to the same state; (6) Qualified house builders can apply for exemption of additional property tax. The builder must apply before and within 30 days after the start of construction, but the house must be sold after the construction is completed.