Point Of Sale Tax Assessment Effects in Georgetown and Horry County, South Carolina

Posted By Tara Melech @ May 14th 2009 12:55pm In: South Carolina Real Estate

In Pawleys Island and Myrtle Beach, SC The point of sale tax assessment has been held responsible for escalating tax bills as well as the dissolution of countless real esate transactions in both the commercial and residential sectors.  It is extremely important to know how this point of sale tax assessment will affect the buying and selling of your property. 

Estimating Property Taxes

The following is the the formula used to calculate property taxes due each year.  The millage rate differentiates for each county and specified areas.  For a list of mill levy rates, you can contact the appropriate tax assessors office. 

Millage Rate X Assessment Ratio X Value - Tax Credits = Property Tax

The millage rate is set by elected officials.  This millage rate is set to meet the budgetary needs of the county.  Georgetown and Horry County have several different mill levy rates, based on specific areas.  For instance:  some areas are not within city limits which may reduce the amount of the budget needed for that specific area.  In general, the mill levy is calculated in amount of tax per thousand currency units of property value.  In other words, a mill is one-thousandth of a currency unit.
The Assessment Ratio is based on the type of property as well as type of ownership.  The current ratio for primary home ownership is 4%.  If it is secondary residence, rental, commercial, or land the ratio is 6%.  Industrial ratio is 10%.  There are ways to reduce your tax liabilty, and you may qualify for eligible tax credits.
The value is of course, currently assessed at the point of sale, which is assessed by the tax assessor.  The tax credits may vary, based on a number of items.  Some school districts may have a higher tax credit, thus reducing the total amount due. 

To calculate the property tax, the authority will multiply the millage rate by the assessment ratio, assessed value (current sales price) of the property minus the tax credits.  The example below is based on a property sales price of 400,000, Pawleys Island, Georgetown County:

Step 1

$400,000  Fair market Value of property (assessed at current sale price)
X       4%  Assessment Ratio (based on legal, primary residence)
 $16,000   Assessed Value

Step 2

$16,000  Assessed Value
X   .183   Mill Levy Rate (example only)
 $2,928   TAXES Due

Step 3

 $2,928   Taxes Due
-  $784    Tax Credits (Assessed Value of $16,000 x school operation mill rate portion of .049, example only)
 $2,144    Total Taxes Due

This type of point of sale assessment encourages longtime residents not to sell in fear of their real estate taxes going up, even if they move to a smaller home of similar value.The problems that occur with this type of assessment is neighboring properties now have gross differences in property tax obligations, simply by one property sold after the change in 2006.  The problem they are facing in the commercial market is when property changes hands; there is increased tax burden on the property and the tax burden will lie with the tenant of the property.  Investors assessing the situation realize the extra tax burden, thus look elsewhere to invest.  Although this has become somewhat of a problematic situation, the property taxes are still not as bad as some other areas of the country, such as Florida.  It is also possible to reduce your tax liability in several ways.  Please read below for information and tips on South Carolina Point of Sale Property Tax.
1.  Apply for the legal residence tax ratio of 4% (only one legal primary residence is permitted.)
2.  Appeal the tax assessor's appraisal if it is too high.
3.  Apply for all eligible tax credits (school operations, disability,senior citizen).
4.  Be proactive by voting. Remember that elected officials set the county millage tax rate.
5.  Consult your attorney or accountant to determine how factors such as point of sale assessment may increase your     property taxes.
6.  Buyers should get a written tax estimate from their tax assessor prior to closing, at the latest. It is     recommended that that buyers get a tax estimate prior to contract.
7.  Discuss this information with your attorney or tax accountant.
8.  You are responsible for paying your property taxes every year. Note: Taxes are calculated for the current year     from the day you close.  If you buy your property May 1, 2009, then previous to May 1, 2009 is the     responsibility of the seller.  There is currently an issue with the difference in taxes based on the current     year.  The attorneys at closing will make each party sign a document that this issue lies between the buyer and     the seller only.  If an issue later arises concerning the property taxes, the buyer and seller agree that they     will be the ones to come up with a resolution.
9.  If you fail to pay your property taxes, you will lose your property.
10. Prepare for possible increases.  Taxes, insurance, and possibly your interest rate may increase every year.      There have been several occasions of decreases as well.
11. Improvements, additions and remodeling add to your home's assessed value and will increase your taxes.
12. Review the summary of property tax bills from the SC Statehouse: 

The South Carolina Association of Realtors is working hard for us regarding the Point of Sale Tax Assessment Reform.  Currently, they are trying to repeal this process and go back to taxes being at an assessed value which are typically way less than a sale price.  One has to realize that when the market goes back up, assessments and taxes will too.
There is a bill making it's way through the legislative process that would eliminate the point of sale tax assessment that replaced the previous 5 year assessment cycle.  I highly suggest you contact your leaders in the House of Representatives and Senate to encourage them to pass new tax reform in 2009 to remove the Point of Sale Tax Assessment in South Carolina. Point of Sale Tax Assessments may soon be a thing of the past.

Offering Superior Real Estate Services for Pawleys Island, Myrtle Beach, Murrells Inlet, Georgetown and Horry County:  Tara Melech (843) 907-8787.

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