Why did I get a property tax bill if I have escrow?

Receiving a Property Tax Bill Despite Mortgage Escrow Account

Understanding Escrow Accounts and Property Taxes

An escrow account, often set up by your mortgage lender, is used to pay property taxes and insurance premiums on your behalf. The lender collects these funds as part of your monthly mortgage payment and then pays the taxes and insurance bills when they are due. This process is designed to ensure that these important bills are paid on time and to prevent you from having to manage large lump-sum payments.

Reasons for Receiving a Property Tax Bill

1. Timing of Tax Assessments and Payments:

  - Tax authorities typically send out property tax bills to homeowners, regardless of whether they have an escrow account.

  - Your lender will use the escrow funds to pay the bill by the due date, but you may receive the bill as a notification of the upcoming payment.

2. Escrow Shortage or Surplus:

  - If there's a change in your property tax amount, your escrow account may have a shortage or surplus.

  - Your lender should adjust your monthly payment to account for the new tax amount, but you might receive a bill if there's a discrepancy.

3. New Home Purchase:

  - If you've recently purchased a home, the property tax bill might still be in the process of being transferred to your lender's attention.

  - It's possible to receive a tax bill directly until the local tax authority updates their records with your lender's information.

4. Change in Lender or Servicing Company:

  - If your mortgage has been sold or transferred to a new lender or servicing company, there may be a lapse in communication with the tax authority.

  - Ensure that your new lender has all the correct information to pay the property taxes from your escrow account.

5. Escrow Account Not Set Up or Canceled:

  - Verify with your lender that your escrow account is active.

  - If you have chosen to cancel your escrow account, you will be responsible for paying property taxes directly.

6. Property Tax Exemption or Adjustment:

  - If you qualify for a property tax exemption or there has been an adjustment to your tax amount, you may receive a bill reflecting these changes.

  - Communicate any exemptions or adjustments to your lender to ensure proper escrow account management.

Steps to Take After Receiving a Property Tax Bill

- Review the Bill: Check the due date, amount due, and compare it with the expected tax payment from your escrow account.

- Contact Your Lender: Confirm that they have received the tax bill and have scheduled a payment from your escrow account.

- Check Escrow Account Statements: Review your escrow account statements to ensure there are sufficient funds to cover the tax bill.

- Keep Records: Retain a copy of the tax bill and any correspondence with your lender for your records.

Conclusion

Receiving a property tax bill when you have an escrow account is not uncommon. It's typically a standard part of the process, and your lender should handle the payment. However, it's important to stay informed and proactive in managing your escrow account to avoid any potential issues. If you have concerns or discrepancies, contacting your lender is the best course of action.

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Sources:

Publication 530 (2023), Tax Information for Homeowners 2024-08-02

Instructions for Form 1098 (01/2022) | Internal Revenue Service 2024-08-03

Publication 551 (12/2022), Basis of Assets | Internal Revenue Service 2024-07-30

2023 Publication 530 - Internal Revenue Service 2024-08-03

Publication 537 (2023), Installment Sales - Internal Revenue Service 2024-07-30

Publication 17 (2023), Your Federal Income Tax - Internal Revenue Service 2024-07-29

Publication 525 (2023), Taxable and Nontaxable Income 2024-08-03

Instructions for Form 1099-S (01/2022) | Internal Revenue Service 2024-08-03

2023 Publication 936 - Internal Revenue Service 2024-08-02

Basis of Assets - Internal Revenue Service 2024-07-31