Friday, April 6, 2012

Myth 22

There is a myth continue to circulate that renters of homes and apartments do not pay property tax. Nothing cold be further from the truth. However, it is true that renters of homes and apartments usually cannot deduct property taxes from their income tax. Of course, the reason for both of the previous statements is the property owner, the landlord, is responsible for paying property tax and in doing so is eligible to deduct that tax from income taxes. But you can be certain that the value of that property tax is considered by the landlord when setting rent. In actuality, renters probably pay more in property taxes than home owners. Residential property is taxed at 25% of appraised value while commercial property (read apartments, etc.) is taxed at 40% of appraised value. While the renter does not write a check for property tax, in every month’s rent check is an amount to reimburse the landlord’s tax expenditures. Regrettably, the words of Leona Helmsley, “only the little people pay taxes” contain a great deal of truth. The wealthy not only deduct all the property taxes they pay but they also find ways to shelter more income by depreciating rental property, swapping assets, and many, many financial actions that allow them to escape, defer, and otherwise avoid writing a check to the tax man (even though the costs of taxes are reimbursed by their tenants in every rent check they receive).