What are Tax Credits in a real estate transaction?
If you are thinking of buying or selling your home, you may be thinking about the taxes. Property taxes in Illinois are a big part of figuring your monthly costs. When buying or selling your home, it is important to understand property tax law in Illinois so you can move through the transaction informatively and smoothly.
Are Taxes Included In My Monthly Payment
Real estate property taxes are just that, they are taxes which you pay on your property every year. In most counties throughout Illinois, you pay your property taxes twice a year. For many people, coming up with two large sums of payments can be expensive. This is why many people execute the option of having their lender set up an escrow account for them which includes their property taxes. This way, each payment to your lender includes your mortgage and taxes in one payment. Often times the monthly payment will include your homeowner’s insurance as well. By taking the route of including your property taxes in your monthly escrow payment, you do not need to worry about paying a large sum on the set due dates twice a year as your lender is collecting and making these payments for you.
How Do I Account For Last Year’s Property Taxes
In Illinois, real estate taxes are paid in arrears. This can present issues when calculating the taxes at a real estate closing. For example, as a Buyer, you would not want to be responsible for paying the Seller’s taxes when you get a tax bill. As a Seller, you want to be sure you give the Buyer a correct tax credit which does not go over or, conversely, goes under the assessed amount. Taxes being collect a year in arrears can lead people into a predicament of trying to guess a correct tax amount. You need a qualified attorney to help you assess the tax amount based upon the standard for the county the property is in. You also need a qualified real estate attorney to represent you should other tax issues arise such as if an addition was made to the property or if a special assessment was issued on the property. These can all pose serious issues to buyer or seller if done incorrectly.