Property tax is a type of tax that many individuals as well as legal entities, such as a corporation, need to deal with. When you own any type of property, you must understand all the applicable taxes which may come into play. Knowing these taxes, how the calculation is done, as well as what the payment of them goes towards is valuable information. Knowing these details can help you understand more in regards to what something like property tax is all about.
What is Property Tax In Detail?
So what exactly does it mean to pay property tax? Property tax is a type of tax that you will need to pay on a piece of property you own. The ownership of the property may have a tie to an individual or a type of legal entity. As a corporation, you could own one or multiple properties for which you pay a tax.
There are several different types of property tax, but the most common is that of real estate tax. This is a tax that falls under the category of a regressive tax. With the value of your property known, inclusive of the land, you will pay a tax based on the formula set forth by your local government.
While real estate property tax is the most common type of property tax, you could also be paying taxes on other types of property. If you own an automobile or a boat, for example, you may be paying a personal property tax on those tangible assets.
Property tax is something that is going to vary from one jurisdiction to the next. The calculation for property tax may vary between your town and the local town next door. You want to have a solid awareness of the property tax rates in your local jurisdiction. While it is common for increases in property tax rates to take place over time, you want to know so you can be in a position to scrutinize tax laws, when appropriate.
How Is Property Tax Calculated?
The calculation of property tax is going to depend on one local government to the next. The starting point for property tax is the applicable property tax rate. Your local government will set this rate and it is something that will go through a review annually. The property tax rate may increase, or decrease over time.
A local government or municipal government will go through the process of hiring a tax assessor. When they bring on the assessor, they will take a look at the local property. The assessor will review properties and assign each a current fair market value. When the value assignment is complete, it is the assessed value of the property. In most cases, this is going to be a piece of real estate and the value will include the property itself, along with the land it sits on.
The amount of property tax you are paying will be a calculation of the property tax rate against the assessed value of that property. If you have a property tax rate of 3% and the assessed value of the property is $100,000, then the property taxes you will owe will be $3,000. That is the most basic formula, but it gives you an idea of how it works.
The same goes for taxes on other types of personal property such as an automobile or a boat. There will be a rate as well as a value that a determination provides which will lead to the amount of tax you are paying on that piece of property.
When I Pay Property Taxes Where Does the Money Go?
Property tax money that local governments take in to get put to use in a lot of valuable ways. When you pay property tax, the local government is going to take those tax dollars to put it back into the infrastructure of the area. This includes things such as maintenance of water and sewer systems. It could also include paying for upgrades to these same water and sewer systems.
If you have law enforcement, fire protection, and other first responders in your local area, property taxes will also help fund their departments. Other areas where money from property taxes will go include things scubas education, construction and maintenance of roads, libraries, and more.
Are Properties Exempt From Taxes?
Some properties are exempt from property tax. These will include things such as public land and facilities, churches, schools as well as hospitals. You may also be an individual, again depending on your local government, who may get an exemption. In some cases, a disabled veteran, senior, or blind person could be exempt from such property taxes.
Contact The Chandler & Knowles Team
Property taxes are important to be aware of if you own any type of property, whether it be real estate or otherwise. If you are an individual taking in real estate income, property tax can offset that income. Knowing how the calculation works and how to handle it as an individual or corporation can prepare you for what is ahead. For assistance or questions regarding property tax, contact our team.