Property tax is a tax obligation. It levied in a county or city level. Each municipality then uses the revenue to finance public services, like the public school system, law enforcement and recreational programs. Aside from the obvious inability to finance these services for residents, failure to pay land taxes includes significant consequences, such as fines, interest, property liens and, sometimes, foreclosure.
Interest
Attempting to pay your property taxes almost certainly results in interest charges, often continuing in a monthly rate until you pay the sum of your overdue taxes in full. Many municipalities impose interest on property taxes that are overdue. The interest typically compounds, so for every month you are still ignore your property tax obligation, you will pay attention to the interest that is already tacked onto your bill.
Penalties
In addition to interest, you can also incur other financial penalties, such as late fees, collection fees and administrative fees for the time spent processing and attempting to collect on your accounts. Although these fees are typical in several areas, penalties vary; your municipality might have extra fees or no penalties at all.
Garnishment
Many municipalities also use garnishment for a way to recoup property taxes that are overdue. The tax authority can garnish your earnings from employment, the balance of your checking or savings account and other liquid investments. The government may also intercept assets bequeathed for you as an inheritance, lottery or gambling winnings, certain social welfare benefits and alimony payments owed to you, until the municipality recoups the entire quantity of your outstanding property tax bill.
Tax Liens
Homeowners who rack up substantial property tax invoices can expect the municipality to levy a tax lien against their properties. Tax liens supersede any mortgage in place against the property. Should you sell your house, the profits would instantly divert to your outstanding tax bill, and any remaining balance you owe on your mortgage becomes your personal obligation. A tax lien also impedes your ability to refinance your current mortgage or seek another mortgage or equity loan, effectively forcing you to pay your earnings until you can do anything else with the property. What’s more, if you are not able to pay back the tax lien at a specified time period, the municipality can seize your property and sell it at public auction to recoup the entire amount of your overdue taxes, including any additional interest and/or penalties you have incurred.
Foreclosure
Should you hold a home loan in the time you first fail to pay real estate taxes, then the municipality will notify your lender, particularly if there’s a tax lien levied against your home. Your lender can–and likely will–choose to repay your overdue property taxes, and demand repayment for same instantly. If you fail to pay back your lender, the lender may foreclosure on your house and offer it for public auction. Based on the amount of property taxes you owe, and the outstanding amount of your home loan, you might be left with no income from the sale–or worse: You might wind up owing your lender after your house is auctioned.