We pay our own taxes every year for our home or property. Some people may tell you it’s easier for your home lender to pay your taxes so you don’t have to remember to save for them each month. I guess the thought of having someone else earn interest on my money, even if it’s a small amount, doesn’t sit well with me.
How We Pay Taxes for Our Home (Property)
We”ve made the choice to take our estimated taxes for the year, divide by 12 and save that money back each month. Yes, it does require some amount of discipline, but we transfer the money into a low risk online savings account and forget about it until tax time. We also save for our house insurance and homeowner’s association dues. No, the savings doesn’t make a lot of money in interest each year, but I guess over time, it adds up.
Especially, when you use a high yield online savings account such as ING Direct.
Are You Saving Enough Money?
Here is a friendly reminder for those of you paying your own home or property taxes. Once you receieve the county’s estimate for your home taxes, it’s time to do a quick check to make sure you’re putting enough back in savings to pay your tax bill on – time and in – full at the end of the year.
Here are some quick steps to follow to make sure you’re on track:
First, let’s assume your home/propery tax estimate was higher this year. Pretend your new tax estimate = $1200 and last year’s taxes = $1000. So, you’re currently saving about $83 ($1000/12=$83.33) per month to pay your taxes at the end of the year (using last year’s tax bill).
- Take your new estimate and divide by 12. $1200/12 = $100.
- Subtract your current monthly tax savings amount from the new monthly savings amount. $100 – $83 = $17. That’s how much shortfall you need to make up each month from the first 6 months (you haven’t been saving enough) of the year. In other words, you have a total of $102 (6 X $17) to catch up or you’ll be short when your tax bill arrives in the mail at the end of the year.
- Finally, add your new monthly tax savings estimate to your monthly savings shortfall ($100+$17=$117). Your new monthly tax savings should be = $117.
When you’re ready to write your check for your taxes, you should be pleased with having enough tax savings to pay your bill; and you’ve earned some money in interest!
Other Guidelines
- If for some reason your home value decreased and your tax estimate is lower, take the extra money and apply to savings or debt reduction!
- I figured the exact amount you needed above to cover your taxes for the year. I suppose the county is just providing an estimate. Therefore, you might increase your monthly savings by $10 – $20 to be certain in avoiding shortfall at the end of the year.
I hope you found this helpful and a friendly reminder to stay on top of your savings for your yearly home or property tax bill. This is one surprise we can all avoid with some quick planning.
Can you think of any other tips or advice that might be helpful for others in paying their home taxes on-time?
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