It’s true. Think about this:
For Mr. and Mrs. Middle-America, what is the single most valuable asset they own?
Their home.
Ah, the joys and pride of home-ownership.
Nobody to whine to but your spouse when something stops working.
The upside? In my little slice of the country, and I’d venture to say most of the other slices, real property appreciates.
In boom years it happens at a much faster rate then the relative rate of inflation.
It’s a great investment, and you are also building your own equity, not paying the mortgage of a landlord.
Win-win.
So, getting back to the wealth tax. Yeah…we all know what property tax is.
It is unavoidable, ubiquitous and terribly frustrating.
It’s also large enough that planning for it year-round along with your entrepreneurial income tax liability is a splendid idea.
I’ve seen property tax bills in numerous states in our practice, and it’s pretty common practice for the county-level assessor to allow two options for payment.
Full payment a few months into the new year, or one-half incremental payments a few months apart.
For example, in the last two counties I’ve lived in the bill is due April 30th in full, or the last day of February and June 15th if paid in two increments.
Please do Choice B. There is no financial penalty for making two payments, and you are spreading this burden out while hanging on to the purchasing power of half of the money a couple more months.
More importantly, though, it’s just easier to budget.
Now, full stop. I know a lot of you, maybe most of you, are thinking, “Hey, my loan company pays that for me.”
Yup, they do. The things I just said are aimed at those that own their home outright, and MUST budget for this annual bummer.
If you have a mortgage, you are paying four components with every payment, and the industry calls it PITI, which sounds like Petey, like a guy’s name.
Principal, Interest, Taxes, Insurance.
Your lender will always require you to put the last two things into an escrow account with them as a condition of using their money, and coughing up interest for the privilege.
This sets an empirical example that I’m getting to here with my long point that I’m making.
For my outright owners with no debt, and no watchdog holding your taxes and insurance for you:
Do it yourself.
Get out your last property tax bill, and your last homeowner’s insurance policy renewal.
Write down the big number for one year from each. Add them together, divide by 12.
Then, maybe round it up a little to the next whole number ending in 5 or 0, just for a little cushion.
Start making a monthly transfer as part of your household expenses budget, and voilà!
You’re not stuck scraping together all the money in one short season.
A word to my entrepreneurs: if you’ve been following our advice regarding the saving of estimated taxes monthly, to pay quarterly, that means that you already have a savings account set aside just for taxes.
I think it’s perfectly okay to use this sacred untouchable account for property tax savings as well.
Now, let me wrap up with a thought here:
I came across the concept of a middle-class wealth tax in one of the news briefings that pops into my sphere, and I suspect you might have read this far wondering if I am going to go on a rant about how the rich pay a proportionately smaller amount of tax on their assets.
I am not.
There are multiple sides to this argument, and it’s not my policy, or the policy of Owings LLC, to comment on politics.
Honestly, the two-party system necessitates a conflict of ideology for the purposes of having something to debate, but neither side is perfectly transparent about what truly motivates the power base.
Congress, and their robber baron strong-arm the IRS is not your friend, and they are here to obfuscate your understanding of how they’re picking all of our pockets.
My opinion of course, but I’m pretty confident it’s shared by many if not most reading this.
I have believed this for years, and that’s why I love what I do for a living.
Real property is unique, anyway. So much so that it has its own section in IRS code.
And most of us pay taxes on non-real property assets anyway, at the state and local level.
Sales tax. What the local politicians write new ballot propositions increases for, every time they want to fund something.
I will say this one thing about taxing the wealthy: the Sixteenth Amendment in 1913 made the taxation of income constitutional, and it’s been with us ever since.
The Income Tax was always envisioned and intended to be a progressive tax. Those with the greater ability to pay, pay more.
That’s why we have tax brackets. That’s never going to change.
We have all witnessed the dismal failure of trickle-down policies to aid and assist the lower-end spectrum of earners, so the argument that an especially-high tax on the especially wealthy will somehow hurt the economy does not make sense to me.
Fortunately, I don’t have to debate on this. I’m here to serve the tax paying public, the wealthy included.
Therefore, though I do have opinions, I’m not so invested in them that I feel a need to defend them.
I promise, I’m much happier that way! It’s not a bad way to be, folks.
I hope you all have a safe and hilariously fun Halloween today, and an amazing last two months of the year!