What you need to know about property taxes
Managing property tax is one of the many responsibilities new homeowners face. Without proper research ahead of time, the added charges can come as a bit of a shock. Understanding what property tax is, how it works and the different types of property taxes out there can help you prepare to pay property tax on top of your other household expenses and bills.
What is Property Tax?
Property tax is a tax imposed at the municipal or county level and through school districts, on property or items owned by an individual. The money is used to fund services such as waste management, sewer, sidewalk and road maintenance and much more. It is also used to support institutions such as police and fire stations, schools, hospitals and libraries.
There are different types of property taxes that can apply to individuals based on their living situations. These include:
- Real property tax. This is the most common type of property tax, applied to your real estate or property.
- Personal property tax. A type of property tax that is applied to boats, aircraft, cars and other vehicles, as well as valuable property such as artwork. It may also apply to other assets such as inventory from a business and stocks or bonds. Personal property tax may also be referred to as state property tax, as it is assessed at the state level.
- City property tax. For those who live within a city's limits, this second form of tax is applied, on top of county or municipal taxes.
How is Property Tax Assessed?
Property taxes are assessed based on two criteria: the building value or value of improvements made to the property and the site or land value. Tax assessors will research selling price ranges for similar homes in the area, estimate the cost to replace your home if it gets destroyed and also look at the prospective selling price of your home in order to assess its approximate worth. This amount is then multiplied by a pre-established tax rate expressed as a percentage, or by a flat rate that corresponds to the dollar value of your home.
Property tax calculations are subject to judicial or administrative review if a property owner believes them to be inaccurate.
Paying Property Taxes
Depending on your area, you may pay property taxes once or twice a year. You may be able to pay online, by mail, by phone or in person at a financial institution.
Property tax relief for low-income persons, persons with disabilities and senior citizens may be available. Contact your municipality office for more information.