As a homeowner, company, or investor in Virginia, it’s best to be familiar with real estate taxes. These include the local taxes that your city, county, or town will charge you on the assessed value of your property as well as those on the state or federal level.
If you’re thinking of buying, selling, or investing in real estate in the near future, understanding how Virginia real estate laws and tax work is paramount. You need to know the why behind each tax and when and how to pay them. These taxes fund local government services like law enforcement, roads, schools, and park maintenance.
In this article, we will cover how Virginia real estate tax law works. Without further ado, let’s dive in.
Virginia's Real Estate Taxes
Authorities in Virginia determine real estate taxes by multiplying your home’s assessed value by the tax rate. The tax rate in Virginia is about 0.74% as of October 2023, and the local government sets it depending on the number of cities and school districts near your property.
The state reassesses property every two or four years to get its actual market value. Some smaller cities can decide to reassess after six years. The FMV (Fair Market Value) is important, and you need to ensure the assessment of your property is accurate to avoid paying excess taxes.
That’s why investors, homeowners, individual home buyers, and sellers should read and understand their home assessment notices. If you disagree with the valuation, you can forward your complaint to the local board or file an official appeal.
Real Estate Transfer Taxes
Investors who want to buy or sell real estate in Virginia are required by law to pay transfer taxes. These are taxes that the local government of Virginia charges to complete the sale of your property as you transfer ownership. The amount of the transfer tax depends on the value of your property or its classification.
For example, real estate classification is divided into A, B, or C depending on the property’s risk and returns. The geographical location, age of your property, amenities, income levels of your tenants, and growth prospects can determine its classification.
Late Real Estate Tax Payments and Penalties
Virginia real estate taxes are paid in two installments. On July 28th and December 5th every year. If you have unpaid real estate tax balances past the due dates, they are considered late payments, and you will be penalized for late payments.
Some extra charges you’ll have to pay include a late payment penalty, a collection fee, and interest on unpaid tax. As a homeowner or investor, if you have yet to pay your real estate tax in full, that is, 30 days past the due date, you will incur the following penalties.
– Tax greater than $100 will incur 5% interest
– Taxes between $5 and $ 100 will incur a $5 penalty
– Any unpaid tax will begin to accrue an interest rate of 10% annually until you pay the tax in full
Defaulting or Failure to Pay Taxes
It’s crucial to ensure you pay all your real estate taxes on time. Failure to pay your taxes will not only lead to penalties, but you can also lose your property. Upon the second anniversary of your due date, Virginia’s local authorities can start the process of acquiring your home or piece of real estate.
The first step is that they’ll file a lawsuit that will allow them to sell your property. If the court rules in favor of the lawsuit, your home will be sold at a public auction, or the authorities can purchase it. You can stop the lawsuit or sale if you provide a valid defense and the court rules in your favor.
Before the authorities file a lawsuit, they’ll give you a 30-day notice for tax closure. This gives you time to prepare your defense or pay the tax you owe. You can pay in full or start paying in installments.
Eligibility for Real Estate Tax Relief
In some situations, a homeowner may be eligible for tax relief. To know if you qualify, check the tax assistance website. For example, people with disabilities and seniors may qualify for real estate tax relief. Also, people going through extremely difficult financial situations, such as the death of a spouse or a sick person, may qualify for real estate tax relief.
Understanding Real Estate Taxes in Virginia
You may be a real estate investor in Virginia or want to buy or sell your home. The first step in this process is understanding Virginia real estate tax laws. Researching your real estate tax obligations lets you know how your property is assessed and valued. It also empowers you to challenge your property assessment if you feel it needs to be more accurate.
You also learn the penalties for late real estate tax payments and the consequences of not paying. At Hutchison & Co, we can help you navigate your Virginia real estate taxes or help you plan for the purchase or sale of a residential or commercial property. Contact us today to learn more and for a complimentary consultation.
