If you are a first time home buyer, it’s easy to look at the home’s sale price and stop there. But there are several smaller, related costs that you’ll want to take into consideration as you plan your budget and your future. One of these costs is real estate tax. If you have owned homes before and are looking to relocate, it’s still smart to investigate real estate tax, as taxes vary state to state, county to county, and even city to city.
Are Real Estate Taxes and Property Taxes the Same?
Let’s talk about terms before we get to specific figures. What most people refer to as “property taxes” is the same as what the IRS calls “real estate taxes.” Real estate taxes/property taxes are paid on immovable property, such as a home or plot of land.
The confusion comes from the fact that personal property taxes are different from real estate taxes/property taxes. Personal property refers to mobile property, such as mobile homes and RVs or vehicles, planes, and boats. You can learn more about these terms and how personal property taxes are calculated here. Today, we will talk only about real estate tax/property tax.
What is the Average Real Estate Tax in Delaware?
As mentioned above, real estate taxes vary based on location. This is because while the bulk of your property tax goes to the state, local governments also add their own taxes. Real estate tax includes county tax, school district tax, vocational school district tax, and municipal tax.
You may have heard that Delaware is a tax-friendly state, and real estate tax is no exception. According to a 2019 WalletHub report, the average American household pays $2,279 on home property taxes every year, which doesn’t include personal property taxes. In 2019, Delaware was the state with the sixth lowest real estate tax out of all fifty states plus the District of Columbia.
For Delaware, the annual real estate taxes on a home priced at the state median value was $1,329. This number is based on a state median home value of $238,600, which means that Delaware has an effective real estate tax rate of 0.56%.
What Will I Pay in Real Estate Taxes Based on Where I Live in Delaware?
While 0.56% of your home’s value is the average rate for real estate taxes in Delaware, remember that you may pay more or less than this percentage based on which county and city you reside in. Delaware’s state property tax is assessed at 0.529% of your home’s value, but your overall tax rate depends on your particular location.
While the exact property taxes collected in each Delaware county vary year to year, generally New Castle County is the most expensive, then Kent County, then Sussex County (see SmartAsset’s numbers). In Delaware, local governments do not assess property values regularly; instead, property taxes in specific counties and cities are based on the home value that was recorded at the time of the property’s last assessment (see more on Clever).
To estimate the real estate tax for your home and your location, check out SmartAsset’s easy Delaware Property Tax Calculator; all you need to do is enter your zip code and assessed home value, and you’ll receive information on your average county tax rate, your annual property taxes, and how these compare with Delaware and national averages.
How Are My Real Estate Tax Dollars Spent?
Before you assume that it’s better to live in Sussex County than New Castle County based on the former’s lower real estate tax rate, remember that the portion of your real estate tax dollars controlled by your local government directly affects the amenities in your local area. So just how are these tax dollars spent?
The answer is that these tax dollars are spent in a number of ways, including road construction and maintenance, traffic and street lights, and sidewalks, as well as salaries for local government staff and municipal employees like police, fire fighters, etc. Beyond these expenditures, real estate tax dollars are also used to fund local organized recreation areas, such as recreational trails, public parks (for which Delaware is famous), and even public transportation. In addition to being funded by federal and state taxes, local schools also receive funds from real estate tax dollars.
Real Estate Tax Breaks
While the real estate taxes listed above are for the most part a “what you see is what you get” affair, there are real estate tax exemptions for certain sectors of the population. For instance, first-time home buyers, residents age 65 and older, and residents with disabilities may be eligible for tax breaks in Delaware.
- First-time home buyers: According to Clever, Delaware offers a tax credit to first-time home buyers that allows them to claim 35% of the interest paid on a mortgage as a federal tax credit, provided it’s under $2,000 a year.
- Residents age 65 and up: Delaware home owners age 65 and older are eligible for a tax credit against regular school property taxes of 50% (up to $400) on their primary residence. Please note that certain restrictions apply.
- Residents with disabilities: See Sussex County, New Castle County, and Kent County websites for more information.
When most of us plan budgets, we don’t plan year to year, but month to month. After you estimate your yearly real estate tax, divide it by 12 and add it as a monthly line item to your budget. Whether you’re buying new or buying an already-built home, your real estate tax will likely be based on the sales price of your home. (Ask your home builder for details to thoroughly understand your real estate tax rate.) Consider that this estimated rate may go up if your municipality plans to build a new recreational center, school, or other public area. Because of this, it’s smart to do your research on the local area as you plan your yearly and monthly budgets.