Most know that when buying a home, there will be costs associated with the purchase, including closing fees at the time of sale. But what about the costs of owning a home? Many understand the basics such as electric, cable, and heating costs, but what about property taxes? Read on to better understand property taxes and how they impact you.
What are property taxes?
As frustrating as it might be, property owners will have to pay property taxes. Similar to other levied taxes, property taxes are used by local governments to cover the costs of services provided to the community. These services include a wide array of things and, depending upon the municipality, could be used for infrastructure, equipment to clear snow, and pay those who work on improvement and maintenance projects. Property taxes are placed upon the value of your home, land, or business property.
How Are Property Taxes Determined?
The basic formula for calculating your property taxes is as follows. Property Tax x the Assessed Value of a Property = Property Tax Owed. The first step in understanding what you owe is determining your land value, including the property’s buildings. Your local government determines this value via an assessment. You can find out the assessed value of your property from either the county’s tax office or from your local tax collector.
Bear in mind that a property’s assessed value may not match the market value. The market value of a home can fluctuate from year to year, and in some cases, as with the recent active housing market, the value can change monthly. Assessments are usually only conducted somewhere around every three to five years. However, this is different for different areas. You will also find that some jurisdictions use an assessment ratio when establishing your property’s taxable value. This means only a percentage of your home’s assessed value is actually taxed. For example, if your city, county, or state uses a 60% assessment ratio, they would apply that to your property’s total value. If they assessed your property at $350,000, they would multiply that by 60%, and your taxes would be based upon the resulting $210,000.
Once you know your property’s assessed value, you can then apply the tax rate. Property taxes are expressed as a millage or mills rate. One mill is equivalent to one-tenth of one cent. So in easy terms, for every $1,000 of home value, you would pay $1 in property taxes. For example, if your property were accessed at $210,000 and your local millage rate is one mill, you would multiply $210,000 times $0.01 to get a total property tax of $2,100.
Looking to navigate the waters of home buying and selling in 2022, I can help! Call me at 717-253-3259 (cellphone) or visit my website at www.karentavenner.com.