For millions of homeowners, the cycle occurs ever year: taxes have to be paid on your property in order to continue to live in your home without default or delinquency. What property tax assessment does is provide a stream of revenue to your state and local governments that can still benefit you as a taxpayer through the various things that tax revenues go toward. For instance, if you are providing tax revenue to your state or locale, you’re helping in many cases to fund hospitals, your local schools, law enforcement, garbage pickup, fire departments, and many other general upkeep issues in your area.
The good news for the localities that are collecting these taxes is that revenues and levies match – meaning that shortfalls one might witness with sales taxes or income tax don’t happen when property taxes are collected. When your property is being assessed, where you live goes a long way into determining your assessment – as the means of assessment differ from area to area. There are also various ways to come up with your tax totals. Perhaps an assessor will determine your property value based on fair market value, which is done when your tax is being calculated ad valorem (value tax). Income approach or replacement cost might also be used to get your tax numbers figured out.
When the value of your property is determined, your property gets what is referred to as an established assessment rate. This number is multiplied alongside the value of your property, and your tax rate is calculated.
At one time, it was even more important for states and localities to levy property taxes on citizens and establishments, as this was the main way of taxation and revenue collecting prior to the 20th century. The addition and increasing popularity of using income tax and sales taxes to gain revenue pushed property tax into a lesser role. Regardless, it still is one of the major expenses for homeowners, next to construction costs.
It might not be pleasant dealing with a property tax assessment – but if you know what’s going on, you can be better prepared.
