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If you’re a homeowner, you’ll need to cough up extra money every year to pay your property tax. This is a charge that local authorities assess based on property you own, including your house.
The higher the value of your property, the more you will likely pay in property tax.
Take the time to better understand how property tax works, who assesses your property, who sets the taxable rate, when and how property tax is paid, and why it can be a good idea to appeal your property tax.
Understanding property tax
Property tax is a levy that your local government charges based on the value of property you own. Property tax is often called an “ad valorem” tax, which means it is based on the assessed value of your property.
The more your home is worth, the more you will likely be required to pay in property tax.
“Property taxes are governed by state law within the state where your property is located,” explains Suzanne Hollander, a real estate attorney and broker who teaches real estate law in Miami at Florida International University. “Property taxes are used to fund local government services like public schools, police and fire departments, libraries, public parks, and other municipal services.”
Make no mistake: You are obligated to pay your property tax. Even if you send your children to a private school, you cannot opt out of paying the property tax portion to fund your local public schools, Hollander cautions.
Your local school district, municipality, county, and other area government taxing districts oversee and impose this tax. Administration is conducted by local officials like assessors in your township, chief county assessment officers, local boards of review, and county collectors.
How your property’s value is determined
The value of the property is determined by local officials like assessors in your township, chief county assessment officers, local boards of review, and county collectors. To determine the taxable value of your property, these local tax authorities will conduct a periodic property tax assessment.
“These parties will assess factors like location, size, and amenities of your property to evaluate its value,” notes Brian Quigley, a tax and finance expert with Beacon Lending in Denver. “The formula they use involves multiplying the assessed value by the local tax rate, which dictates your property’s tax liability.”
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How your property’s tax rate is determined
The tax rate (often called millage rate) is decided via public hearings by your local school district, municipality, county, and other area government entities where the property is located, per Hollander.
For example, let’s imagine your home has an assessed value of $250,000. Say the tax rate in your area is 1.7%. Multiply $250,000 x 1.7 and you get an annual property tax due of $4,200.
Drilling deeper, know that property taxes are commonly expressed in millage rates; this represents the tax paid per $1,000 of a home’s value. Case in point: if your millage rate is low, say $0.001, you would owe $1 for each $1,000 your home is worth.
Here, you would divide your millage rate by 1,000, then multiply your home’s assessed value (not appraised value) by the millage rate to calculate what you owe. Assume your area’s millage rate is 7.5. If so, 7.5/1000 = $0.0075; $250,000 (your home’s assessed value) x $0.0075 = $1,875 in property tax due annually.
According to Kathy Alfaro, CEO of Alfa Tax Service in San Antonio, your local taxing authorities will determine the millage rate for the assessed value of your property.
“They will have a set of rules on how your property’s value is determined in your jurisdiction, she says. “Some use the property’s appraised value while others use its market value.”
Every state has different rules. In the state of Florida, for instance, the County Property Appraiser’s office determines the taxable value of each parcel of real property each year, per Hollander; elected officials within the county or city will then determine the tax rate.
How and when property tax is paid
Property tax is typically paid annually or semi-annually, such as every six months. In some states, property taxes are paid in arrears (later), while in other states they are paid in advance.
You should automatically receive a property tax bill or statement, often by mail, well before the tax is due. The total payment owed and the deadline to pay will be indicated on the statement.
Even if you don’t receive your tax bill in the mail, you are obligated to pay your property tax.
“Homeowners either make property tax payments directly, or they have the tax automatically paid by a neutral third party via funds held in an escrow account,” adds Quigley.
An escrow account – often managed by your mortgage lender – ensures that necessary expenses, including your property taxes and homeowners insurance premiums, are paid punctually on your behalf.
If you pay your property tax yourself, you can usually send a check, electronically transfer funds from your bank account, or, if allowed, use a credit card.
Appealing your property tax assessment
The good news is that if you don’t agree with your property tax bill after receiving it, you can appeal the assessed value (but not the tax rate).
“It’s a good idea to try appealing your property tax assessment because it’s a right you have as a property owner. It’s also free or inexpensive to file an appeal – in Florida, the cost is $15. Additionally, you may be successful and able to reduce your property taxes, thereby decreasing your costs of ownership,” suggests Hollander.
Consider that assessments are often calculated as a blanket change.
“That means your local taxing authority may just apply a flat 2% increase on all homes, which may not be fair to your situation. Perhaps you had a flood or fire, or maybe a new housing development in your area has created horrible traffic congestion and homes are not selling like they used to, reducing their value,” Alfaro says. “Protesting your property tax gives you the opportunity to present your evidence that your property has been unfairly assessed.”
But don’t expect to win your appeal and get a lower tax bill without providing evidence.
“This usually involves gathering proof of nearby comparable properties valued less than yours based on recent sales or listed homes for sale, and then submitting the evidence to local assessment authorities,” says Min Hwan Ahn, an attorney in Philadelphia. “You can do this work yourself or hire a third party to assist with this process, although they will charge a flat fee or a percentage of your reduced taxes if your appeal is successful.”
Other evidence can include photos, repair estimates, fire reports, engineering reports, blueprints, deed records, or surveys that support your claim of overassessed value.
It’s important to learn the deadline and rules for filing an appeal in your area, which can differ across the country. Some tax assessors allow you to submit the appeal paperwork via email, fax, snail mail, or in person.
“After receiving your appeal, the taxing authority will respond with a settlement amount. If you disagree with it, you will have a hearing where you may present your evidence of why you believe the assessment is incorrect,” says Alfaro. “In other jurisdictions, you may have to go directly to a hearing. Check with your local tax assessor’s office to learn the exact process involved.”
The bottom line
Paying property tax is not optional. Failure to pay what’s owed can result in severe financial penalties or even the loss of your home, so take this responsibility seriously.
“Effective budgeting is imperative for punctual property tax payments. Be sure to set aside the necessary funds monthly or within your escrow account, carefully understand tax due dates, and maintain an emergency fund to address unforeseen financial challenges should they arise,” recommends Quigley.
It’s also a good idea to ask the property appraiser in your county if there are exemptions you qualify for that may reduce your property taxes.
“Many states offer reduced taxes to people for their primary residence—including seniors and veterans. Normally these exemptions are not automatic, you have to apply for them,” says Hollander.
Still have questions or remain unsure about property taxes or assessments? Contact your local tax assessor’s office and get the answers and information you need.