Luxury homes in The Bahamas are among the hottest properties around the world, particularly for US buyers. What they might not know is just how much they might be paying in real property taxes.
An Important Factor in Any Homebuyer’s Decision Making
Many American buyers purchase their new home in The Bahamas with Better Homes and Gardens Real Estate MCR Bahamas, and working out just what the tax obligations that go with that purchase are is an important step in the process.
Better Homes and Garden Real Estate advises homebuyers to never overlook property taxes when deciding on a home. The recurring expense could shift their outlook on which properties they can truly afford.
Understanding the Two Primary Types of Property Taxes
Like in most jurisdictions, home buyers in The Bahamas will face taxes both annually and at the time of purchase. Any property purchased in The Bahamas will incur a Value Added Tax.
This tax is 10% on properties over $100,000 and 2.5% on those below that threshold. In general, this is going to be split between the buyer and the seller, but this is ultimately up to the specific agreement.
Of greater concern for most buyers is the annual property tax, which must be paid every year that they continue to own the property. There are many factors to consider, including whether or not the property is occupied by the owner. Individual locations within The Bahamas also have various levels of tax exemption.
The tax rates are separated into several brackets depending on the property value. For owner-occupied properties, the rates will be:
- 0% on the first $250,000
- 0.628% from there to $500,000
- 1% on value above $500,000
The annual property tax rate is capped at $60,000 for owner-occupied properties.
Rates are more complicated for rental and commercial properties, generally trending higher and also incorporating flat fees. Foreign citizens holding vacant land face steep property taxes of 2% on any value over $7,000.
Determining the Value of Your Property
Another key point to remember is that these annual tax rates are calculated based on the assessment by the Department of Inland Revenue, not on the price that was paid for the property. Inspectors will visit the property to take photos and measurements of buildings, pools, and other permanent features.
This information is used to determine the value of the property, which might have changed based on improvements made since the last assessment. Any homebuyers claiming that the property is owner-occupied will have to provide the relevant paperwork for the assessment.
Paying Your Property Taxes
Property taxes are generally billed to property owners in October, to be paid by the end of the year. Payments in The Bahamas can be handled directly at a local bank, through the Department of Inland Revenue, via wire transfer, or through the government’s online payment portal.
Quarterly or monthly payments can also be arranged, and property taxes are often rolled into specific mortgage agreements. Late payments should be avoided, as a 5% surcharge will be applied. Depending on the property in question, this can be a sizable penalty for late payment.
Certain groups can receive reductions in the amount of property tax they owe. Many US citizens buying property in The Bahamas are doing so to enjoy their retirement, so the Senior Citizens Benefit may be of particular interest. Those who are over 65 and register for the program can reduce their property tax by 50% on properties valued under $1 million.
Purchasing a Home in The Bahamas
Property taxes are a part of making a home purchase anywhere. They need to be taken into account, but they shouldn’t dissuade anyone from considering the luxurious homes that The Bahamas has to offer. Better Homes and Gardens Real Estate specializes in luxury real estate in The Bahamas and can find the perfect listing for any interested buyer.