You may be paying too much property tax!
Read on to learn more about how your property tax is calculated, and how verifying tax record information, or disputing a previous assessment, could make a huge difference in how much property tax you have to pay!


Table of Contents

What is Property Tax?

Property tax is an ad valorem tax that an owner of property pays on the value of the property that is being taxed. There are three different types of property: Land, Improvements to Land (eg. homes, buildings or parking lots), and Personal (eg. Automobiles, boats and computers). Real estate, real property or realty are all terms for the combination of land and improvements and will be the focus of this book. The taxing authority requires and/or performs an appraisal of the monetary value of the property, and tax is assessed in proportion to that value. Forms of property tax used vary between countries and jurisdictions.

There is a form of tax which is often confused with the property tax. This is the special assessment tax. There are two distinct forms of taxation: ad valorem tax, relying upon the fair market value of the property being taxed for justification, and the other, special assessment which relies upon a special enhancement called a "benefit" for its justification. This is typical if for example your road was recently paved and only those in your neighborhood were taxed.

The property tax rate is often given as a percentage (amount of tax per hundred currency units of property value). It may also be expressed as a permille (amount of tax per thousand currency units of property value), which is also known as a millage rate or mill levy. (A mill is also one-thousandth of a dollar.) To calculate the property tax, the authority will multiply the assessed value of the property by the mill rate and then divide by 1,000. For example, a property with an assessed value of $150,000 located in a municipality with a mill rate of 20 mills would have a property tax bill of $3,000.00 per year

What is "Taxable/Assessed Value"?

Often referred to as taxable value or assessed value this is what your local taxing authority has set as the value at which your local tax rate will be multiplied. Your statement should show side by side, this year’s taxable value compared to last year’s taxable value. This will show you how much; according to the local tax assessor your property has either risen or lowered in value.

Why is this so important?

Since it is impossible to lower your local tax rate on your own without a general election, the only thing we can influence is the taxable value of our home. The lower the value, the lower the tax..

What is "Property Identification"?

It is important to take note of your property identification number and the legal description printed on your notice. This will be helpful should you need to reference the property with your assessor, file any dispute paperwork or look at your property record card.

Example of property identification:

Example of your legal description:

How can my "Property Classification" affect my property taxes?

Often one of the most overlooked aspects of an individuals notice. An obvious mistake would be if your home was classified as industrial. For vacant land owners it is important to be sure you are not classified as improved residential. In addition to the right type of classification take notice if your property has any exemptions.

Examples of exemptions:

  • “Homeowners Principle Residence”
  • “Qualified Agricultural Property”
  • “Qualified Forest Property”
  • “Industrial Personal”
  • “Commercial Personal”

State property tax systems typically follow one of two policies:

  • That all property, without enumeration, is taxable unless specifically exempt or
  • That only such classes of property as are specifically enumerated are taxable.

In virtually every state, the property tax follows a market-value based system under which property is taxed on the basis of its fair market value. The concept is commonly understood to represent the price the property would bring at a fair, voluntary sale. In other words, the value at which the property would change hands between a willing buyer and a willing seller, neither being under any obligation to buy or sell and both having reasonable knowledge of relevant facts

The extent to which a given parcel or item of property is subject to taxation is generally dependent on several issues. The first is whether the property constitutes real property, tangible personal property, or intangible property. Next is who owns the property and to what use the property is put, because that ownership and/or usage may dictate that the property is entitled to full or partial exemption from taxation.

State definitions of "real property" generally include land, any improvements permanently attached to the land, as well as all rights and benefits from ownership of any lifetime or greater interests in such land improvements. "Personal property" is generally defined by way of exclusion, with all property other than that falling within the definition of real property being considered personal property.

The distinction between tangible and intangible property is then commonly made by considering any item of personal property that may be seen, touched, or moved about to be tangible personal property. The following definitions are representative of the law in most states.

Real Property - means land, an improvement, a mine or quarry, a mineral in place, standing timber, or an estate or interest in any such property.

Personal property - means property that is not real property.

Tangible personal property - means personal property that can be seen, weighed, measured, felt, or otherwise perceived by the senses, but does not include a document or other perceptible object that constitutes evidence of a valuable interest, claim, or right and has negligible or no intrinsic value.

Intangible personal property - means a claim, interest (other than an interest in tangible property), right, or other thing that has value but cannot be seen, felt, weighed, measured, or otherwise perceived by the senses, although its existence may be evidenced by a document.

Who is the taxpayer?

Who owns a given parcel or item of property is important for property tax purposes because the owner of the property on the assessment date is primarily responsible for paying the property taxes. The identification of the owner is also important because property may be exempt from tax or otherwise receive special tax benefits merely on the basis of who owns the property.

In most cases the owner of the property is straight forward, that being the person on record as the owner on the date of the assessment. However, there are certain situations where it is not so clear.

Agents and Assignees - Agents and assignees may be required to pay tax and file reports on property held in their capacity as such, although their principals and assignors, respectively, remain primarily liable for the tax.

Joint Owners - Any person holding property jointly or in common can be held liable for the tax as to the whole property, or as to his or her proportionate interest.

Lessors and Lessees - Generally, because property is taxable to the owner, lessors are liable for taxes on leased property. However, lessees are not necessarily relieved of any property tax obligations with respect to leased property, and are frequently held liable when:

  • they are in possession of the leased property and the assessor is unable to determine who the lessor is or where the lessor can be located;
  • they make improvements to the leased property that increases its value;
  • they lease property from an exempt entity such as the state or municipality; or
  • when the lease is of such an extended duration that it is considered a permanent or perpetual leasehold.

Owners of Severable Interests - The owner of mineral rights, surface rights or crops, timber, quarry and similar interests that have been separated from the land is usually liable for tax on those separate interests.

How does the property's use affect my property taxes?

State legislatures can, subject to certain limitations, exempt any persons or property from taxation or provide comparable tax benefits such as abatements, credits, or reduced assessment ratios. In general the tax benefit must serve a public purpose and the classification on which it is based cannot be arbitrary. In most cases the availability of the benefit will be conditioned on the property being used for a specific purpose.

How did you arrive at the appraised value of my property?

Many taxing authorities use software to appraise areas instead of looking at your home specifically. While this frees up time for your local assessors they have never set eyes on your home and could leave you over assessed.

Am I allowed to protest my taxes?

Of course anyone can, mistakes are made often, it is up to you to make certain your taxable value is accurate, property description is correct and that you are taken advantage of all tax deductions you are eligible for. The only thing you can't challenge is the tax rate your pay the only way to change that is to vote.

What if I can't pay my property tax?

Every taxing authority is different, typically what happens is after a few months from due date interest and penalties are applied, and if not resolved a tax sale is held after 2-3 years of delinquency.

What is the best way to lower my assessed value?

Get your facts straight, if you have reason to believe your home is worth less than what your bill says, have solid evidence. This would include comparable properties that sold. Our area partners can provide help and since they are all licensed professionals their opinion is more of an influence.

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