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Property Tax Overview, Basics, Paying Your Property Taxes


Real estate property taxes are taxes on the value of land and any improvements (usually buildings) on that land. Taxing property is one of the oldest methods used by local governments to finance their activities, and property taxes once provided a large portion of states' revenue, before income and sales taxes. Today, revenue from property taxes finance a variety of local services ranging from schools and libraries to fire and police protection, garbage collection and more. Taxing authorities are government entities that are typically agencies within local governments and have the power and responsibility to levy, appraise and collect taxes. They may be cities, towns, counties, hospitals, schools or other special taxing districts. In most cases, the county treasurer or other collection authority sends you a single property tax bill that consolidates all of the individual taxing authorities' levies. Property owners must pay property taxes regardless of whether or not they actually use the property.

Valuing Property and Setting Tax Rates

Methods of appraising and assessing property can vary widely. An assessor determines the value of your property, using market value, replacement value or any other accepted method of valuation. The assessed value may be 100% of this valuation or some lesser percentage. Property values are periodically reassessed and, if the value changes so does the amount of tax owed. Most property lies within multiple taxing districts, and each taxing authority imposes its own rates, although many states do set limits on how high a rate the various types of government can impose. The amount of taxes a given taxing authority collects determines the level of services it can provide. When setting its rates, an authority may: 1. Divide its estimated necessary expenditures over the next year by the assessed value of all property for which it is authorized to levy taxes. The result, often expressed as a percentage, is the tax rate. Your taxes will fluctuate based on the tax rate that year. 2. Or, it may apply a fixed rate and set its budget based on an estimate of the amount of taxes it will be able to collect at that rate. The taxing authority's budget will then fluctuate up or down with property values.

Paying Your Property Taxes

How and when you receive your property tax bill and pay the taxes due depends on where you live. State or local law sets deadlines. Some states may send one bill covering multiple installments, while others will send separate bills for each installment. Some municipalities may give discounts for paying early or impose graduated penalties for late payments. You generally have several options for paying your taxes, including check or credit card. You may mail payment or pay in person at certain locations, often banks. In some areas, you may be able to pay by phone or online. Some localities may also accept partial payments. Property owners with a mortgage may have the option of having their taxes paid out of an escrow account (a third-party account set up to hold money in trust for others). In these cases, your monthly mortgage payment includes an extra amount that goes into your escrow account. Your mortgage holder then pays your property taxes from this account. The government can record a tax lien on your property if you do not pay your property taxes and can foreclose on your home to recover those taxes. Make sure you know when your taxes are due and pay them on time. If your taxes are paid from an escrow account, verify that the appropriate collection office has received them.

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