Since the beginning of the COVID-19 pandemic, over 33 million Americans have lost their jobs in the worst economic downturn since the Great Depression. While the Trump Administration is working to re-open the economy and the debate about public health interests continues, many Americans are in financial distress. Monthly bills for rent, electricity, water, auto payments, mortgages still need to be paid. For 80 million American homeowners, another bill is looming-property taxes.
Levied by local governments, property taxes are the primary source of funding for community interests such as schools, road maintenance, and police departments. Since property taxes are handled by cities and counties rather than the IRS or states, there has been no large-scale response to the issues caused by COVID-19.
You may be struggling to pay your property taxes in full while also keeping up with day-to-day expenses. Learn what to expect if you don't pay and some strategies you can use to cope.
What Happens If You Don't Pay Your Property Taxes
If you find yourself unable to pay the property taxes due, you can expect one of three things to happen:
1. Late Penalties
In the best-case scenario, you have to pay late penalties on your property taxes. These penalties are normally a fixed percentage of the original tax, and the amount varies from state to state. In California, for example, homeowners who owe on their property taxes have to pay a penalty that's 10% of their property tax.
2. Tax Liens
In twenty-two states, being late on property taxes can result in tax liens. In states like Louisiana and Mississippi, this means that your property taxes are auctioned off in return for a certain share in your property. In this process, someone else pays your property taxes for you in return for a claim on a certain percentage of your house or apartment. That percentage depends on how high or low a prospect bids in the auction.
To resolve the situation, you have to pay these investors back for the property taxes they paid for you with interest. If you don't manage to pay the total back within three years, the investors become the legal owners of the percentage of your property that they purchased in the initial auction. This percentage can range from one to 100%.
At the very least, this results in some complicated legal proceedings but there is also the possibility that ownership of your property passes over entirely to the investor.
3. Foreclosure
The worst-case scenario you face if you fail to pay property taxes is foreclosure. This means the government can sell your property to collect the delinquent taxes from the proceeds. The exact regulations for this vary between states. In Washington State, for example, the process of foreclosure can begin if owners haven't paid property taxes in three years.
What Can You Do Right Now?
The first step to take if you are unable to pay property taxes due to COVID-19 is to contact your property tax office immediately. In some cities and counties, relief programs are already in place or are currently being set up. Even if that is not the case in your area, you might be able to agree on a partial payment or to negotiate a payment plan.
Several states are also making relief efforts. On May 6th, Governor Gavin Newson signed an executive order to waive the 10% penalty on late property taxes in California. In Texas, there is a push to freeze property appraisals at the 2019 levels to avoid placing additional burdens on homeowners due to rising property prices.
With the U.S. still tightly in the grip of the COVID-19 pandemic, many Americans may face financial burden for the foreseeable future, including the payment of property taxes. By facing the challenges head-on, being straightforward with property tax offices, and trusting in cities and counties to ease the burden of homeowners, there is a possible chance that the situation can be altered.
