How do property taxes work?

As the saying goes: the only thing in life that is certain is death and taxes. This is particularly true for homeowners and other property owners. Property taxes are going to be annual issue that you will have to face as long as you own a home or another piece of property. In order to lessen the blow and frustration of property taxes, it is important that you acquire as much knowledge about the subject.

Therefore, it is important to answer the question, “How do property taxes work?” Essentially, property taxes are annual government levies that are applied to a piece of property. The amount of property taxes that a homeowner will have to pay is based on the assessed market value of the property. The market value of the property is determined by the county assessor’s office. However, all property taxes are deductible against current income taxes.

Local governments take the majority of property taxes where it is their main source of revenue. The collected revenues accumulated from property taxes are then used to help pay for public services. Additionally, state governments receive a portion of property taxes, albeit a much smaller portion. Essentially, stage governments receive approximately one cent per $100 of assessed property value.

On average, 1.5% of the assessed market value makes up your annual property tax level. However, there are three entities that will determine the amount of property tax a homeowner has to pay. The first of these entities is the State Legislature, which establishes property classes and the property class rates. Additionally, the State Legislature is responsible for determining the levels of state aid that local units of government will receive as well as establish the general tax rate for the state. This effects the second of these entities, the local government who determine their tax levy amount. The third entity involved in determining property tax is the county assessor that assigns each property within their county its market value.

Although this seems like a straightforward process, it is important for all property owners to understand the various factors that will affect property tax rate. These include: changes to the tax levy by the city, county, school district, or special taxing districts; changes made to your property’s market value or to the property class that your home falls under; changes made through legislation that affects property classification rates, state aid formulas, and other tax laws; and the affect of new taxes that have been approved through voter referendum.

If you currently have questions that are related to property taxes and how it specifically affects your home or homes, it is recommended that you consult with your accountant or tax advisor.

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