Property taxes are levied against real property (land and buildings) owned by individuals by local governments such as cities, counties, townships, school districts or special districts in order to generate revenues for themselves. Property tax levies provide this important revenue source.
Understanding how property taxes work is vitally important when purchasing real estate. Here are the essential points of consideration.
An assessed value is defined as its worth as determined by local government and is calculated using selling prices of comparable homes in your area as comparison points, multiplied by an assessment rate set by that particular jurisdiction.
This process seeks to ascertain a fair market price for your home in order to allow the government to collect taxes required for public services. Unfortunately, assessed value rarely matches up with market value.
Your assessment can change for various reasons, including market and local real estate conditions as well as changes to your house resulting from additions or renovations that exceed the annual 6% cap or 20% in five year increments for Class 1 properties. Once assessed values have been multiplied by mill levy rates to form your property tax bill.
Millage rate may not be top of mind, but it plays a critical role in calculating property taxes. A mill represents tax assessed per thousandth (one tenth) of an assessed value; thus 10 mills equal $10 in taxes paid on every $1,000 assessed value.
Local governments such as city and county governments and school districts typically set property tax rates to generate revenue to pay for essential infrastructure like roads, schools and emergency services. For instance, in New York the statewide school tax rate stands at 35 mills; however a homeowner’s local portion could vary based on homestead exemptions and other factors.
Calculating property tax liability involves multiplying taxable value of the home by its mill rate and can provide home owners with a better idea of their tax obligations and allow for easier planning.
In most cases, the taxable value of a property determines how much property tax must be paid. Calculations by municipalities using assessment service providers give this figure as the foundation upon which property tax calculations take place; it can be found either on your tax statement or by calling up directly the municipal office.
Market values can be affected by various factors, such as location and supply and demand, which means their taxable values could differ significantly from actual market values – which has many people concerned about the possible increase in property tax bills.
But there are steps you can take to reduce your property tax burden, such as appealing your assessed value or refinancing your mortgage. In addition, take advantage of local programs designed to assist with managing both taxes and costs more easily. If you’re a homeowner with rising property taxes, check out our expert-recommended refinance options today.
Many states provide property tax exemptions to qualifying properties and individuals, including nonprofit, religious and government properties as well as seniors, veterans and low-income individuals. Exemption amounts vary between flat-rate amounts based on value to percentage exemptions depending on state regulations; applications should be filed before their deadline to take advantage of any potential exemptions.
Homestead exemption is one of the most frequently utilized property tax breaks, providing homeowners with an annual reduction in taxable value by an amount specified. To qualify, they must occupy their primary residence as their primary home and reside there at least part time during each year.
The SCHE (Senior Citizens’ Homeowners’ Exemption) program offers another important property tax break for older New Yorkers. This annual property tax deduction benefits owner occupants 65 or older of co-ops, condos and single family homes who own these structures – potentially saving thousands. Apply now!