As if a real estate deal weren’t complicated enough. You also have to figure out how you’re going to be taxed on the sale (and how to reduce that burden as much as you can). Find out everything you need to know about Georgia real estate taxes below.
What other word can strike such fear into the heart of even the bravest among us? It only gets worse when you know that you have a looming tax bill but don’t yet know how much it will be. For example, when you buy or sell a home.
Don’t get caught off guard. Learn all about Georgia real estate taxes here. Who knows? You might be surprised to find that it isn’t as bad as you thought it was going to be.
Section I: Will You Have to Pay Taxes When You Sell Your Home in Georgia?
The answer to this question is the same as the answer to nearly every other tax question — it depends.
IRS rules relaxed on capital gains taxes back in 1997. Before that, you could only avoid paying these taxes once and you had to be over the age of 55. Additionally, you could only exclude up to $125,000 of gains.
Now, however, anyone can qualify — provided you meet a few requirements. You must have owned the home for at least two years. You must have lived in the home for at least two of the last five years. You must also not have excluded gain from the sale of another home within the last two years.
An important thing to note is that the amount you can exclude is limited. A single person can exclude up to $250,000 in profit. If you are married, this doubles to $500,000.
Now you may be wondering what counts as profit. Let’s say you sold the home for $300,000. Deduct any closing costs from the purchase price, say $9,000. You’ll receive $291,000.
You purchased the home for $225,000 and have added an additional $25,000 in repairs and upgrades. Add these two numbers together to find what is known as your cost basis. Subtract this from the amount you’ll receive and for this sale you’ll have earned $41,000 in profit. This is well under the $250,000 limit and you won’t have to pay taxes on it.
The state of Georgia doesn’t levy any additional capital gains taxes so you get to keep your entire profit.
Section II: How Much Are Real Estate Transfer Taxes in Georgia (and Who Pays Them)?
But don’t do a happy dance just yet. There is one more type of tax that your sale can be subject to. The real estate transfer tax.
This tax is levied by states, counties, and municipalities. Your sale can also be subject to more than one transfer tax. For example, the state and the city where the property is located may each charge their own transfer tax.
There is a huge amount of variety in the rules for transfer taxes from one state to another. Some states don’t have a transfer tax at all. Some states charge a percentage of the sale price, others a flat fee. Some states charge the seller, others the buyer, and still others divide the burden between the two. Some states charge more on more expensive sales and so on.
Georgia charges a very reasonable transfer tax. Expect to pay $1 for every $1000 of the sale price and $0.10 for every $100.
The state holds the seller liable for paying the tax. However, buyers and sellers often agree in the contract that the buyer will accept the burden instead.
Remember that the state isn’t the only entity that can charge this tax. Your county or municipality may also levy a transfer tax. Talk to a knowledgeable, local real estate agent to find out the applicable taxes in your area.
Section III: How to Calculate Property Taxes in Georgia
Not every state calculates property taxes the same way, but here is the general method.
An assessor will first determine the value of your home for tax purposes. Then you will be charged based on the current tax rate, or “mill rate,” for your area. One mill equals $1 for every $1000 of your home’s value. Mill rates are set by the community and can change based upon their revenue needs.
In Georgia, the median home value is $158,400 and residents will pay $1,448 per year on that home price. That works out to be slightly less than 1% of the home’s value — a figure that is slightly below the national average.
Keep in mind that property taxes can vary from one location to the next. For the most accurate information on what taxes you should expect to pay on your new home, talk to a local real estate agent.
Section IV: Tax Breaks for Georgia Home Buyers & Sellers
You have to pay some taxes when buying and selling real estate. But there are also some tax breaks you can take advantage of. Let’s take a quick look.
Tax Breaks and Credits for Buyers
Mortgage interest and private mortgage insurance premiums are tax-deductible. Make sure that when you do your taxes you take full advantage of this as its a significant tax break.
In Georgia, there are also a couple of tricks you can use to reduce your property tax burden.
First, appeal the assessed value of your home. By shaving a few thousand dollars off the value, you can save yourself several hundred dollars a year.
Second, are the various exemptions that Georgia law allows for. For example, if your spouse was killed in the line of duty as a police officer or firefighter, you are exempt from property taxes (until you remarry). Georgia also has exemptions in certain cases for seniors and veterans. There is also a standard homestead exemption of $2,000 that you may qualify for.
Tax Breaks and Write-Offs for Sellers
Sellers can deduct various expenses related to selling their home. These include:
- Any mortgage interest and property taxes you paid for that year
- Discount points from your mortgage
- Moving expense (if you’re active military)
- Repairs and improvements in preparation for the sale
- Any costs related to the sale
Of course, this is only a general overview. Tax breaks and credits and their rules vary depending on the location of the property. The best way to get the most up-to-date information is to talk with a local real estate agent.
Whether buying or selling the advice of a local real estate agent is invaluable. And when you find an agent through Clever, you’ll save on commissions if you’re a seller and receive a home buyer rebate back if you’re a buyer.
Now that’s clever.