How To Manage Your Property Taxes
There are a lot of things to love about owning your own home, but property taxes isn’t one of them. They’re one of the very necessary but also unpleasant aspects of owning a home. Property taxes, according to Investopedia, are real estate taxes that are calculated by the local government and paid for by the property owner.
This tax is based on the value of your land and property, and it’s used to fund law enforcement, fire services, and other improvement efforts in your area. Unfortunately, this means if your home is overvalued, you’re actually paying too much for property taxes. In this guide, we’ll break down how property tax is calculated so you can take a closer look at just how much you’re really paying.
How Are Property Taxes Calculated?
Property taxes are calculated based on your home value, a number that’s determined by your local tax office. Your house will be assessed every one to five years depending on local laws, and this is how your taxes are calculated.
In the calculation, the tax assessor determines the value of your home using a number of methods. One option is through the sales comparison, which means the assessor compares your property to those that have sold recently in your area. Another method is known as the cost method where the assessor calculates the total cost of creating your home from the ground up. Finally, if you own a commercial property, the tax assessor will likely use the income method which estimates how much income you’d receive if the property was rented.
So what’s the math behind this calculation? As you can see, tax assessors use a number of factors to decide how much you pay. Your property assessment is multiplied by your local tax rate, also known as the mill rate. One mill is equal to $1 for every $1000 of your property’s value. For instance, if your local mill rate is 40 and your property is assessed for $200,000, you’ll multiply 200,000 by .04 to arrive at $8000. This will be your property tax for the year.
Signs You’re Paying Too Much
A reported 30% to 60% of all taxable property is over-assessed. You might be paying too much. Your first step is to obtain a copy of your property record from your local tax assessors’ office. Online records are usually incomplete, so opt for a physical copy which might cost a small fee.
Next, you’ll want to do some math. Start by checking your square footage. Make sure this number matches the number on your report. If it doesn’t, you’re in a good place to appeal your case. This is one of the most common error when it comes to property taxes.
After you’ve measured square footage, count the number of rooms with running water. This is known as a running water count, so only rooms such as kitchens and bathrooms. These rooms are more expensive for tax purposes, so ensure your downstairs bar hasn’t been counted as a kitchen, for example.
Finally, take into consideration the condition of your house. The style of your home as well can play a large role. Colonial homes are usually valued higher, for instance. Check how your home is categorized to make sure it matches the real style. Finally, take a close look at the condition of your property. If there are things that would bring your property value down, document them.
Once you’ve gotten all of your paperwork together, make an appointment with your tax assessor to declare your case. As long as you’ve done your research and have clear documentation, you’ have a good chance of getting your property tax reduced.
Nobody wants to pay more taxes than they need to. If you’ve suspected you’re overpaying for your property taxes, take action. You don’t have to accept your home assessment on the first glance. Follow these tips above to second-check these numbers to make sure you’re not parting with your money for no reason.