Typically, a county or city assessor sets property values, and the county treasurer collects property tax payments. Depending on the location of a property, the relevant jurisdiction will typically send a property tax bill to the property owner based on the assessed value, payable in quarterly, annual or biannual payments. Property taxes are an example of an ad valorem tax and are calculated based on a property’s assessed value. The assessed value may equal what the property would sell for on the open market, depending on local tax rules, or a percentage of that market value. Each area may have their own specific rules. For example, in California, property taxes are limited to the home’s initial purchase price, plus inflation. Many state, county and city property tax programs can reduce, defer or assist with the amount due for qualifying individuals, such as senior citizens, veterans, people with disabilities, widows, or people with limited income. To claim an exemption, you’ll need to prove that you’re eligible.
Examples of Property Taxes
Property owners pay property tax to local governments based on how the city, county, or state determines the value of the property, whether that’s land, the overall value of a home, a commercial building, or even a car. These taxes often fund schools, and other local government needs, such as fire and police protection, libraries, city services, transportation and recreation. But the term property tax tends to be used for real estate. In particular, many people focus on property tax regarding home-related taxes. The property tax rate for owner-occupied property ranged from 0.31% in Hawaii to 2.21% in New Jersey per year in 2020, according to The Tax Foundation, a tax policy nonprofit. As an example, if a home was valued at $500,000, and was taxed at a rate of 1%, and the owner received no exemptions or deductions, the homeowner would pay $5,000 per year in property taxes. Property taxes are typically managed at the county level, but there can also be specific property taxes for other jurisdictions like individual towns, cities, or school districts. For example, many of the towns in Oswego County in New York also levy their own property taxes in addition to the county property taxes.
What Do Property Taxes Mean for Individuals?
Property taxes are important for individuals to understand whether or not they own a home. If you own real estate or hope to buy, then you need to budget for your property tax bills. You may be able to afford mortgage payments if they are roughly equal to rent. But if you’re in an area where property tax bills can be reassessed at market value, then you may need to pay increasingly higher property tax bills. If you don’t own property, it’s still useful to understand local property taxes. Your rent probably doesn’t have a line item for property taxes, but your landlord will most likely want your rent to cover the cost of property taxes, improvements or maintenance, any mortgage, and profit, among other things. That means local property taxes will generally impact what your landlord charges. It can also be useful to know how much property tax is collected in your community, and what it’s used for. If you’re active in politics or have children in local schools, you may want to know how the government spends property tax money on education or other services.
