Property tax is usually levied on the assessed value of real estate and sometimes other property by local comunities to support schools, municipal government, county government and services provided by other local agencies.
The tax is determined by the assessed value of the property multiplied by the tax rate. In most communities the assessor deterimines the fair value of the property for tax purposes. In some communities the assessed value is current market value. In some communities it is some fraction of current market value. Reassessment is the process of bringing the assessed value of property up to current values.
The tax rate is determined by local authorities and in some cases must be approved by voters. The tax rate is often in the form of so many dollars per $100 of assessed valuation. Once authorities arrive at a budget for their activities, the tax rate is determined by dividing the budget by the total assessed value of property in the tax district. Sometimes the budget must be adjusted to arrive at an acceptable tax rate.
Most communities collect property tax on real estate. Some also tax other property like automobiles, boats, inventory, business fixtures and equipment. Some states have income-sensitivity provisions in their property tax laws that cap how much residents have to pay at a certain portion of income.
Most property owners receive a property tax bill and pay the tax directly to local authorities. Those with mortgages sometimes pay into an escrow account from which the mortgage service company or the lender pays property taxes on the property which secures their loan.
Related Fool Articles
- Challenge Your Property Tax Assessment
- Property Tax Savings
- The Motley Fool's "Home and Real Estate" Center
- The Motley Fool's "Death and Taxes" Center
Recent Mentions on Fool.com
- Vector Group's Q2 Earnings Report Could Light Up Its Stock Price
- 2 Reasons a SodaStream Takeover Won't Happen
- How Bank of America Convinced Steve Ballmer to Pay Up for the LA Clippers
- American Midstream Partners Proves Bigger Isn't Always Better
- 7 Things to Know About Your Brokerage Account
- Why Priceline Group's Stock Is Up More Than 37% in the Past Year