When a home owner decides to convert a home into a property rental, one of the most overlooked, yet important aspects is notifying their local tax assessor about this decision.
I see a lot of home owners turn their property into a rental asset because they had military orders or a new job in another city.
Years later, someone else wants to purchase their home. One common reason is my client’s tenants fall in love with a rental property and want to purchase it.
When it comes time for someone to sell their home, many can find themselves facing a lien from their county tax assessor because they haven’t notified them about a change in residency status. When the home sale is completed, the title company will then pay the back taxes and the penalties for not reporting the change in residency and failing to remove tax exemptions they are not entitled to receiving.
In Texas, home owners qualify for property tax exemptions if they meet specific criteria set by state law. (Texas Form 50-114 is available online at http://www.bcad.org/data/_uploaded/file/PDFs/50-114.pdf,) Other states provide unique tax exemptions as well. For example, a Florida law allows a quadriplegic home owner to get a special waiver on property taxes.
When a home owner finances his or her home, the mortgage broker can typically advise them of tax programs that may lower their property tax bill. A mortgage professional can assist a home owner with the paperwork needed to get these exemptions.
The mortgage company has a specific interest in paying their customer’s property taxes. If the home owner doesn’t pay the property tax, the tax assessor can foreclose on their investment. When the mortgage is paid off, the home owner begins paying the property taxes associated with that residence.
A home owner must understand that he or she takes full responsibility for advising their local assessor of a status in an occupancy. San Antonio home owners can do this by sending an email to cs@bcad.org with their name, property address, and the date they are no longer residing at the property. It is important to note that if the homeowner was residing on the property any day past the first day of each year, he or she still qualifies for that year’s homestead exemption.
Every county and their taxing team may have unique rules concerning notification and tax payment. I would advise someone who is transferring their home into a rental to call the county tax office to get their specific criteria.
Just as important is to notify a property tax district of any change of address. I would recommend a written letter, keeping a copy of it in a safe place. After sending that letter, I would allow two to three weeks to verify that the county tax appraiser has updated the information online.
Our property management team tells our customers that they must take the full responsibility to handle all tax issues. The county tax office wants only to deal with
For those who know they’re making a move or two because of their military or other career, it’s a good idea to add the job of notifying their tax assessor’s office to their relocation checklist. That way, the tax office can notify them directly of changes in their tax bill, regardless of their residence.
More importantly, it will keep the home owner from getting a nasty surprise from an unexpected tax bill when he or she tries to sell the home.
(I am a Property Manager based in San Antonio. If you have questions about this or any other property management topics, please feel free to message me.)
