Following, a basic explanation of a common confusion about the property tax paid on newly built houses in Marion County, Florida.

Disclaimer: This article is solely intended for informational purposes and in no way constitutes legal or financial advice.

The property tax paid to the county on a newly built house during the first year when closing occurred is calculated based on the value of the lot, only. Regardless of the closing having taken place on January 1 or December 31, this is the first year. The property tax bill is usually submitted by the county in November and must be paid before the end of the year to avoid paying extra.

The second year, however, the property tax to be paid will be higher than the value paid during the year the property is purchased because the county updates the full value of the property by adding the house that has been built. 

For the above:

·  If a person or family buys a newly built house with cash, the second year they must prepare to pay a higher property tax based on both the lot’s value plus the value assigned to the new building by the county authorities. In subsequent years there might be some small changes.

·  If a person or family buys a newly built house with financing (MORTGAGE), in January of the second year it is recommended to contact the mortgage company to request an increase to the "ESCROW" portion of the mortgage monthly payment. ESCROW is a RESERVE (or savings account) that the mortgage company charges you monthly with the purpose of paying the property taxes and insurance bills when necessary. The intention with this call to the mortgage company is that instead of accumulating monthly in the escrow account only the amount to pay the taxes of the lot as in the first year, additional money begins to accumulate to pay the invoice that will have an increased value at the end of the second year because of adding the building’s value. This bill will be sent by the county in November: the original copy to the mortgage servicing company and one copy to the homeowner. The mortgage servicing company will then send the respective payment to the county. The homeowner only has to monitor that the mortgage company makes the payment, which is reflected in the monthly statement.

If such call to the mortgage company to request an increase of the monthly escrow payment is not done, it may lead to one of the following situations to happen at the end of the second year, depending on the company's policies:

a) The mortgage company may send the property owners a large bill at the end of the second year collecting the shortfall to pay the property tax that was not collected during the year.

    Or

    b) The mortgage company pays the bill in full by using their own resources              and loans it to the user (generally without interest). Then, from the beginning          of the third year, the portion of the monthly mortgage bill that goes to                      “escrow” will be increased so that it collects enough money to both start                  recovering this “loan” and accumulate enough to pay the property tax at                  the end of the third year.

    Logically, from the fourth year on the escrow portion of the monthly mortgage        bill should be reduced, because the amount loaned by the mortgage                        company for having paid the property tax of the second year should have                been refunded in full, already. Therefore, the escrow portion for the                          monthly mortgage bill should cover the property taxes and insurance for                  the current year, only.

For questions regarding property taxes, it is recommended to contact the appropriate entity in the county (in Marion County, FL it is George Albright Marion County Tax Collector) and/or the mortgage servicing company if you purchased the house with a mortgage loan.

If you are interested in buying a new or used  house in Ocala area, contact us at (352)266-2782  or  [email protected] 

Our services to you will be paid by the seller's agent and, thus, free to you. 

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