Don’t Lose Out on Your Property Tax Credit
As we approach the end of the year, make sure you are considering the property tax credit home buyers will receive if you close on a home purchase before January 1.
Here’s what you need to know.
Property taxes are paid in arrears in Colorado, meaning they are paid in the year following the year they are assessed.
As an example, 2019 property taxes are due in 2020. If you close on a house on November 15, the seller will credit you for one day of property taxes for every day that they owned the house, so they will credit you one day of taxes from January 1 until November 14. As the year progresses, the amount of tax credit a buyer gets from the seller increases. Near the end of the year, it is often thousands of dollars.
When you calculate the amount of money you will need at the closing, as a buyer, it’s important to remember that this tax credit will be used to pay for some of your closing costs.
Property Tax Credit
If your contract states that the seller will pay for some of your closing costs, you need to keep in mind that you will be getting property tax credit. If you ask the seller to pay $4,000 towards your closing costs, and after the tax credit is subtracted from the closing cost amount, you only owe $3,000, the seller will get to keep the extra $1,000 and the buyer will lose out on a credit that they should have received. It can only be used to pay for your closing costs. It cannot be given to a buyer in cash.
How do you make sure you are calculating the amount of closing costs correctly? The only way to make sure you are not going to be cheating yourself out of a tax credit that is due to you is to use a lender who knows how to calculate the costs and the credit correctly. Many lenders know how to do that, but unfortunately, many lenders do not. We are one of the lenders who knows how to do it. It’s just one more reason you should be using us as your lender.
Contact us today if you want to talk to a lender who knows how to figure out the numbers.