It’s good to know this simple formula.  With a little snooping around, you can find out these variables that go into your property taxes so you can know what you should be paying or expect to pay on a new home purchase.  Find out what the assessed value of your home will be.  Usually you get a statement from the county about this once a year.  Next find out the tax rate and do that math and, bingo, you know your property taxes.  It doesn’t reduce the pain of having to pay them but at least you take some of the mystery out of the process.

Just to make sure, here is an exercise.  After checking your property tax assessment, you may have found out that your home is appraised at $100,000.  Remember this is not necessarily what you paid for your home.  So go by the official county assessment.  Now multiply that by the ratio that is used for your county to figure out how they will bill you.  So for our exercise, let’s say is it 50%.  So the assessed value for your property is now $50,000.

Now find out the tax rate.  For our exercise and to make things easy for us, let’s say the tax rate is .05.  That is pretty high but it’s an exercise.  We do the simple math and your property taxes will be $2500 for that year.  That amount will be split across the 12 monthly house payments you make.

Here is a worksheet for you.

1.            The assessed value of your home is ……………          $____________

2.            The assessment ratio for your community is……            ____________%

3.            Line 1 times line 2 gives you the assessment value of  $_____________

4.            The tax rate for your community is……………..            ____________%

5.            Line 3 time’s line 4 gives you your property tax of…    $ ____________

Even If Its Right, it Might be Wrong

The figures you used to fill in the worksheet might all be absolutely correct according to your research.  When you exercise the worksheet, if you discover that from a mathematical point of view, your property taxes that you are paying are correct, that doesn’t make them right.

There are mistakes that can happen when it comes to the assessment of your home which is the base of how the property tax is computed.  If the assessed value of your home shows as $200,000 and you know for a fact that your home should not be valued that high, you are probably right and the government is wrong.  It doesn’t mean that anyone is doing anything criminal or that there is a conspiracy theory unfolding.  Mistakes in how homes are valued happen all the time.

But it is up to you to fix the problem.  Now that you know how to compute your tax, the next step is to learn how to get an accurate assessment of your home made and see your property taxes reviewed.  Once you learn the ropes of how to do that, you can prevail to see your property taxes come down.  All it takes is some knowledge, some patience and a lot of good old fashioned stubborn perseverance.  If you have those three things, you have a good chance of winning at seeing the taxes on your property reduced.

If the math for this worksheet gets to you, don’t be ashamed to use a calculator or spreadsheet to compute your tax.  If line 5 gives you sticker shock, you for sure will be checking your math.  But just knowing the terms and where to find the basic values that go into your property tax puts you ahead of the game.

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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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Make it Your Job to Control Your Property Taxes

There are two things you can do about your property taxes – complain or take action.  Complaining is a popular choice because you can sit around your local pub or with friends and let everybody known you think you are being had on your property taxes.  Other than irritating your friends and loved ones by being a complainer, nothing comes of that kind of approach.

The way to see some deserved relief on your property taxes is to take action.  That means learning out property taxes are computed and getting an understanding on exactly what you can do.  Then you must learn who are the movers and shakers you need to get to know and learn HOW to talk to them to get things done.  Charging into a government office and pounding your fist on the counter won’t get the job done.

If you put some time into learning what to do and then set about a systematic and organized plan to get your property taxes under control, you can win the fight. You won’t see your property taxes go away all together.  But after learning all you can about how taxes are computed and how to make the system work for you, you will know that the taxes you pay are fair.  And that is all we really want after all.

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How much you might pay for property taxes varies widely around the country.  The average amount most people pay is around $1800 a year.  But in some parts of the country like New Jersey, people are paying as high as $8000 a year.  God forbid you own an estate sized house in New Jersey or you really end up paying through the nose.

What not a lot of people know is that there is something you can do about your property taxes.  There are procedures that most cities have in place that you can use for “grieving” your property taxes.  That means that if you know how, you can actually get your property taxes lowered and keep them lower for many years.  These are little insider tricks about property taxes that are worth learning.

The Painful Truth About Property Values

The sub prime mortgage crisis has devastated property values for everyone.  People who track such things estimate that there may be over 2 million foreclosures on homes because of this mess.  This can only mean that property values for everyone, even good upstanding citizens who pay their mortgage on time, will plummet.  That means about 45 million homes could lose over $200 billion in value before this whole thing is through.

This makes it even more important that you stay on top of the assessment that is being used to calculate your property taxes.  There may be mistakes in the form of your home not be classified correctly, math mistakes or just information that is not current that could cause your property tax assessment to be too high.  That means you are paying too much in property taxes and that is not fair to you.

To say the least, the steps you must take to get your property tax assessment fixed can get complicated. It’s the government after all and nothing the government does is easy.  The problem is made more complicated because right now property values all over your town, your state and our country are dropping like stones and far more homes are heading into foreclosure than anyone was prepared to deal with.  In a lot of municipalities, how local property values are computed is being reviewed.  The process of getting your property assessment reviewed which is called the “grievance process” is being employed at almost epidemic proportions right now.  The system is glutted with people like you and I that just want to use the rules that are in place to make sure our property assessments are correct and if they are too high, to see those assessments lowered so we can pay correct property taxes.

Click here to see Part 2: Getting Some Control Over Your Property Taxes Part 2

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