TIP TUESDAY: TAXES

They say there are two unavoidables in life: death and taxes. We’ve found that property taxes in Montana are quite confusing, so let’s talk about how the bills work.

Property tax is paid in arrears. This means that when you get a bill, you’re being charged for them after they’ve already gone into effect, much like your electric and gas bills. The confusing part about this is that you receive a bill once a year in November for both billing cycles. The cycles are from January through June, which is due the following November, and July through December, which is due the following May.  I like to think of it as the year being a pie, the months as slices, and you’re paying for 6 slices twice a year, after you’ve already eaten them.

To make things easier for those with a mortgage, your taxes are included in your monthly payment, put in an escrow account to be set aside until the bills are due. Your mortgage lender will then pay the taxes for you from the escrow account, and you don’t have to keep track. Sometimes, as taxes do change and the portion of your payment that goes into escrow is a prediction for what is needed, there may be changes to your monthly bill to accommodate any changes in taxation.

Finally, if you are selling your home, you will need to prorate your taxes to be paid off up to your closing date. So, if you close in March, you’ll need to pay the July through December cycle, and then prorate January to your closing date in March. In Montana, the title company will do the proration and have everything written out in your closing statement, but if you’d like to get an idea for your proceeds you can use this knowledge to come up with a ballpark figure.

I hope this helps you to understand your tax bill. As always, the more you know the better off you’ll be!