What You Need to Know About Mortgage Grants in 2019
Grant funding is available to help with down payments, closing costs and more for those who qualify.
COVID-19: The health and safety of our customers and colleagues is our top priority. Visit Plains Commerce Cares for the latest information.
Each state has a unique method for calculating real estate taxes. South Dakota is similar to other states in most ways.
If you’re house hunting, you need to know what your property taxes will cost. This is just one of the significant expenses that come along with owning a home. It’s also very manageable as long as you plan for it.
A quick way to estimate your property taxes is to take the sale price of the home and multiply it by 1.5%.
You can also look up a specific property online. Most counties supply this information. For example, if you perform a Google search for “Minnehaha county property tax,” you’ll likely see a link to Minnehaha county’s property tax search. This is a public search, so even if you don’t own the home yet, you can see how much property taxes cost for a particular address.
Your county’s tax assessor office determines your property taxes. First, the county will assess the value of your home. Your home’s value is already on file if you’re not building a new home. This is likely going to be different than the actual price you paid for your home.
Each year, the county calculates property taxes by taking the current assessed value and multiplying it by the current mill levy—the tax rate for a property. The value and rate can fluctuate from year to year, so you may see a change in the real estate tax amount you pay each year.
The amount of property taxes you pay will also vary depending on whether you’re purchasing an existing home or building new.
In South Dakota, you’re always paying the previous year’s taxes.
When you first buy a house, you may not feel the full weight of your property taxes. That’s because taxes are prorated to your closing date. The previous owners will pay last year’s taxes for when they lived in the home. Just remember that when you go to sell the house, you’ll be doing the same.
When you build a house on a vacant lot, the county will not assess the value of your property as high. Once your build is complete, the county will reassess your property value, and your property taxes will increase. Because you’re always paying for the previous year’s taxes, your first year in the home will be the property tax amount for the vacant lot. Paying less during your first year is great. However, be sure to plan for a tax increase the following year. Talk with your mortgage banker about adjusting your escrow account to prepare for this increase. (See more on escrow accounts below.)
In South Dakota, property taxes are due twice a year—April and October. Paying your property tax bill all at once can be overwhelming. Thankfully you can break up your payments.
For most mortgage loans, there is an escrow account tied to your monthly house payment. The escrow account is great for budgeting purposes. Each month you pay an amount (generally 1/12 of your annual real estate taxes) to the escrow account. This is lumped into your house payment. Then, when real estate taxes are due, the bank will send your payment to the county.
Right now, homeowners can take advantage of some great tax deductions. Real estate taxes, interest, and private mortgage insurance (PMI) could be tax deductible.
You can deduct about 20% of the amount of real estate taxes you pay for your home as long as it’s your primary residence. All other properties you own, including a second home, lake home, or commercial property, cannot receive this deduction.
When you purchase your primary residence, complete and return the Owner Occupancy Form to your local county assessor’s office. Then you’ll be able to receive the 20% real estate tax deduction. You only have to do this once for the remainder of the time you own the home.
If you are a first-time home buyer in South Dakota, you may be eligible to receive additional benefits. If you get a mortgage through the South Dakota Housing and Development Authority First-Time Homebuyers Program, you can receive a Mortgage Credit Certificate (MCC). A credit is different than a tax deduction. It’s a dollar-for-dollar reduction of your taxed income as opposed to a percentage.
Please consult your tax advisor regarding your tax needs.
Even if you’re purchasing a home outside of South Dakota, you’ll likely have a similar experience when calculating and paying your property taxes. Always check with the county you’re considering residing in to see how their property taxes differ. You can also speak with your mortgage banker regarding questions or concerns you have.
Home ownership is a rewarding and enjoyable experience as long as you plan for everything that comes along with it.
While we offer this link for your convenience, please note that we are not responsible for the content provided by third-party websites. We encourage you to review the policies of any website prior to sharing personal information to ensure privacy and security. Any products or services accessed through this link are not provided by, endorsed or guaranteed by Plains Commerce Bank.Continue Stay on plainscommerce.com