Property taxes in the US are imposed by individual states, i.e. at the local level.
Each state will have its own set of guidelines that inform local governments in any given jurisdiction how much they can tax local residents.
It’s worth noting that in terms of revenue, property taxes make up the largest source of revenue for local and state governments in the U.S.
The median tax rate for properties falls between 0.2 to 1.9%.
The cost of this tax is calculated based on the value of your property.
You might be wondering if property taxes change? Or if there are factors that influence the cost of property taxes?
In this article, we aim to answer both of these questions, so if you’re curious about property taxes and whether they change or not, read on!
Do Property Taxes Change?
As we’ve mentioned above, what the average American pays in property tax varies from state to state.
When we’re considering whether property taxes will change, it’s important to look at the factors that might determine whether you could be liable for a higher taxation on your property.
The value of property in the US is rising steadily.
This increase in value will translate into an increase in property tax liability.
However, it’s worth noting that this will not happen automatically. The vast majority of homeowners will not see a change in the value of their home until a local assessor deems it necessary.
The second factor that will determine whether you could pay more, or less, property taxes, is through state-and-local-tax deductions (SALT).
The SALT deductions were capped at $10,000 back in 2017. However, lawmakers residing in high-tax states have been working tirelessly to get this limit repealed since in came into effect.
Changes At The Local Level
Certain municipalities are due to raise tax rates to cover their expenses.
However, owing to federal funding, these proposed increases might not be as steep as previous years.
On the other hand, certain states are lowering property taxes to give their citizens more financial breathing space.
How Is Property Tax Calculated?
The calculation for working out property tax involves what is known as the mill levy.
The mill levy is defined as the tax rate levied on a property value, where one mill is equal to one tenth of one cent.
For example, for every $1,000 of assessed value, one mill is equal to $1.
This mill levy is multiplied by the assessed value of the property to give the amount of property tax payable by the owner.
The assessed value of a property is an estimate of the reasonable market value. This is typically bases on local market conditions.
There are three different methods an assessor can use to determine the market value of a property. These methods can be used individually or in combination with each other.
1. Sales Evaluation
By performing a sales evaluation, the assessor can determine the value of a property by using comparable sales within the local area.
There are certain criteria that feed into this evaluation, including: the state of the property, location of the property, any extensions/improvements made to the property, and the overall condition of the market.
2. Income Method
The income method is based on accurate estimates of how much money you could make if you rented out the property.
The following things are taken into consideration when using the income method:
- Managing the property
- Insurance Costs
- Cost of maintenance
- Any reasonable returns expected from the property
Once the market value of the property has been established, the assessor will give you the assessed value based on the actual value multiplied by an assessment rate.
The assessment rate is defined by each jurisdiction and is both a uniform percentage and any value under 100%.
Once the assessed value has been calculated, it is then multiplied by the mill levy to calculate the property tax costs.
3. Cost Method
The cost method involves an assessor determining the value of the property based off of how much it would cost to replace.
If the property is old, the assessor will determine the amount of depreciation that has happened and how much it would be worth if empty.
If the property is new, the assessor will look to deduct all realistic depreciation and take into account things like cost of building materials and labor. These figures are also included in the final value,
Tips On Property Tax
A property tax assessment is usually conducted either annually or every five years.
Once the property owner has received their property valuation, the property tax bill will arrive separately.
All the information an assessor has on a property is considered to be public record.
You can see how much property tax you need to pay by visiting the assessor website and entering your address.
Another way to find out how much you owe in property tax is to visit the assessor’s office. These are usually located in the county courthouse.
Is There Anywhere In The US Without Property Tax?
The bad news is that there is no place in the US without property taxes.
Property taxes are used by each state in slightly different ways, but the vast majority of them use the revenue to fund government services like fire/police departments, schools, libraries, and water districts.
Property taxes changes happen relatively slowly, as they come from your municipality and are governed at the state level.
It’s worth checking if you can pay or view your property tax bill online.
By remaining educated on how the tax is calculated, when you are expected to pay the tax, and where you can find information on the amount of tax you owe, you are ensuring that there are no nasty surprises down the line.