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A Simple Guide for Property Taxes in the US

Updated: Sep 26, 2020

It is a known fact that dealing property taxes is often complicated, especially for Real Estate Agents. The appraisal of properties and the tax rates vary by county or state and it is hard to keep up with them. Here is a quick guide on the basics on property taxes and how to be on top of them!

What are property taxes?

A property tax is an ad valorem tax on the value of a property, usually levied on real estate. The tax is levied by the governing authority of the jurisdiction in which the property is located.

Property taxes are a major source of income for local governments, comprising 72% of local tax collected. Property taxes typically fund your local schools and libraries, emergency services, roads, and parks and recreation department.

What are the types of property taxes?

Property taxes fall into two main categories:

  • Secured Property Taxes

  • Unsecured Property Taxes.

Secured Property Taxes: A Secured property tax is a tax for a physical property, most often real estate and land. In some cases it is also referred to as Real Property Tax. If Secured property taxes are not paid, the property will be foreclosed on to cover the taxes owed. Unsecured Property Taxes: An Unsecured property tax is for personal items, like an airplane, boat, or business. In some cases, it is also referred to as Personal Property Tax. If Unsecured taxes are not paid, the item can be seized and sold to cover the taxes owed.

How are Property Taxes Calculated?

Before you receive your property tax bill, you should receive your property’s value. This value is determined by your tax assessor and is typically calculated once a year, or once every five years, depending on the local laws. To determine the amount of property tax owed, the tax assessor will calculate your property’s value by the local tax rate, often called a mill rate. The mill rate (or tax rate) is set by the city or county when determining the amount of funding needed for the local services detailed above.

Here is a complete equation for determining how much property tax is owed would be the following:

  • Market Value x Assessment Ratio = Assessed Value

  • Assessed Value - Exemptions = Taxable Value

  • Taxable Value x Sum of All Relevant Millage Rates = Property Tax Before Credits

  • Property Tax Before Credits - Homestead Credits and Circuit Breakers = Property Tax Owed‍

How often do you need to pay property taxes?

Paying your property tax can be arranged with your local tax office in annual or semi-annual payments (& in some cases by installments). Veterans, senior citizens, and other individuals may also qualify for a reduced property tax rate. Early payments of property taxes can be made at discount in quite a few counties across the US.

As soon as you type these words into a Google search, along with location, you’ll be met with a wealth of resources! Because requirements will differ by state and county, there is no one place to get the required information in the United States. A startup called Papergov is making it easier to access all local government services like Property taxes and all the information (like FAQs, due dates etc.) which could be pretty handy for Real Estate Agents. You can find information on property taxes across all the 50 US states on their site, whose team compiled this useful guide.



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