How Property Tax Rates Work

It’s that time of year again, and some of you may have already received your property tax bill calculation for 2011. If that’s the case, you’re probably be wondering just how the government calculated the property tax rates and why your bill changes every year. Well, the following will answer some of your questions.

First, there is a difference between property tax rates and a property tax assessment. The rate is an overall percentage at which your property is taxed. The assessment is a value of your property, so that the government can determine how much money it is taxing.  States have different rules for conducting a property tax assessment, but the goal is to get an accurate value for the taxable property. This is usually determined by the replacement cost of structures and property, or the market value of the property calculated via comparison to similar properties.

Keep in mind that reassessment happens every few years, directly impacting property tax rates.  Once a property tax assessment has been conducted for an entire region, the local taxing entity then determines property tax rates.  Tax rates are determined in one of two ways, but are subject to percentage caps imposed by the law.  The taxing authority can choose to divide its yearly projected expenditures by the assessed value of all property in the region, assigning a portion to each property. It may also choose to estimate its budgetary needs based on different tax rates until it finds a reasonable rate.

Though no one enjoys fluctuating property tax rates—or taxes in general—they serve an important function. Taxes pay for local services, such as police and the fire department, as well as maintenance of infrastructure. They also pay for schools. So complain all you want, but please pay your property tax bill.

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