Property tax is a recurring levy imposed by local governments on property owners, based on the value of their real estate. Typically, property taxes are collected locally and fund local community services such as schools, roads, law enforcement and fire departments. The amount of the tax is usually determined by assessing the market value of the property and applying a specific tax rate, known as the millage rate. Homeowners can expect to pay property taxes annually or semi-annually, depending on the local jurisdiction. Understanding what property tax is and how it is calculated can help property owners anticipate and plan for these costs as part of their homeownership expenses.
A financial advisor can help you identify tax-saving strategies, including deductions or exemptions that you may qualify for as a homeowner.
How Are Property Taxes Calculated?
Property taxes are calculated based on the assessed value of the property, which is usually determined by a local assessor. The assessed value can vary depending on market conditions and improvements made to the property. It differs from appraised value, which aims to determine the fair market value of a property. Assessed value is often 20% to 40% lower than appraised value. A property owner who feels the assessed value is too high may be able to appeal the assessment and, with adequate documentation, convince the assessor to use a lower figure.
Once the value is established, a tax rate is applied to calculate the total property tax owed. This rate, often referred to as the millage rate, is determined by the local government and can vary between municipalities…