How Do They Compute Your Property Taxes? Part 1
written by Credit-HQ ExpertThe first step of getting control over any situation is to know what you are up against. There is an old phrase that goes, “knowledge is power”. When it comes the working with the government and making progress to see real change in how your taxes are computed, knowledge is absolutely necessary. You need to know what variables go into your property taxes and which of those variables you can change. You need to know how the municipal government works and who you should contact to get your property taxes reviewed and changed. But before you learn these facts, your “basic training” in learning about the property tax system is to know exactly how your taxes are computed.
Four basic elements are used to figure out what you will be hit for when property taxes are added to your house payment. And it is a worthwhile exercise to learn a little bit about what goes into that tax so you know the ropes when you set out to get your property taxes lowered. Those four elements are…
• What the value of your property is appraised at. There is a local assessor who figures out what your property values are compared to the neighborhood you live in. Sometimes this is called a property assessment estimate. Sometimes what drives that assessment is the market value of your home and sometimes it is based on the values that houses have been selling for in your community.
• There is a ratio used to mitigate the assessment. In parts of the country, the taxes people pay is computed on one quarter of the value they are appraised at. That percentage that is used to compute the actual tax can vary from state to state and even county to county.
• Then they do the math. The assessed value of your home is multiplied by that ratio we just talked about. So if the ratio is ¼ of the appraised value, then if your house is worth $100,000, the value used to assess taxes would be $25,000. Count yourself lucky if the formula for taxation is that low in your community because in some states, property taxes are based on 100% of the assessed value of the home and property.
• Finally the assessors take that assessed value and compute the tax based on the tax rate that is currently in force in your community. The tax rate will vary widely based on what the city needs to run the local government and operate the schools, take care of the roads and pay for other local municipal needs. The rate is based on per $100 of appraised value. So if the tax rate is $1 per $100 of appraised value, you would pay property taxes of $250 for an assessed value of $25,000.
Click here to see Part 2: How Do They Compute Your Property Taxes? Part 2
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