UNDERDSTANDING REAL ESTATE TAXES
If you own real property in Georgia, you may be subject to taxes. The basic formula to figure the tax on a home using the State's standard $2,000 homestead exemption is: [(assessed value) - $2,000] * millage rate = tax due Example: Fair market value means "the amount a knowledgeable buyer would pay for the property and a willing seller would accept for the property at an arm's length, bona fide sale." Assessed value is 40% of the fair market value. If a person that owned a home with a fair market value of $100,000 in an unincorporated area of a county where the millage rate was 25.00 mills, that person's property tax would be $950.00--[(100,000 * 40%) - $2,000] * .02500 = $950.00. Multiply $100,000 by 40% which is equal to the assessed value of $40,000 and subtract the homestead exemption of $2,000 from the assessed value. Then multiply $38,000 by the millage rate of .02500 which is equal to $950.00.
Ad Valorem Taxes
Ad valorem property taxes are levied on real or personal property by local government units including counties, municipalities, school districts, and special taxing districts. Ad valorem means a tax on goods or property expressed as a percentage of the sales price or assessed value.
In Georgia, the transaction taxes are split into three categories: Transfer Tax, Intangibles Tax, and Residential Loan Tax.
The Transfer Tax is imposed at the rate of $1.00 per thousand (plus $0.10 / hundred) based upon the value of the property conveyed and applies to real property that is sold, granted, assigned, transferred or conveyed.
The Intangibles Tax is imposed at $1.50 per five hundred ($3.00 per thousand) based upon the amount of loan. The State of Georgia Intangibles Tax must be paid within 90 days from the date of the instrument. The failure to pay the Georgia Intangibles Tax bars foreclosure of the property.
The Residential Mortgage Fee of $10.00 is due for any loan subject to the Georgia Residential Mortgage Act. The fee is paid to the Georgia Department of Banking and Finance.
State Withholding Taxes
The rate of withholding is 3 percent of the sales price. An alternative for calculating the withholding is to use the seller’s gain. If the calculated amount for the withholding is more than the cash received at closing, the buyer must withhold and remit only the net proceeds otherwise payable to the seller. There are a number of exemptions to the withholding requirement. If the property qualifies as a principal residence under the Internal Revenue Code, the exemption from withholding applies for the gain that is excluded from Federal AGI under the Internal Revenue Code.
Federal Withholding Taxes
The transferee ("Buyer") must deduct and withhold a tax equal to 10% of the total amount realized by the foreign person on the disposition. The amount realized is the sum of (1) The cash paid, or to be paid (principal only), (2) the fair market value of other property transferred, or to be transferred, and (3) the amount of any liability assumed by the transferee or to which the property is subject immediately before and after the transfer. The amount realized is generally the amount paid for the property. If the property transferred was owned jointly by U.S. and foreign persons, the amount realized is allocated between the transferors based on the capital contribution of each transferor.
Court Filing Fees
The court imposes a nominal documentary fee usually based on the number of pages contained in the instrument being recorded.