Are Real Estate Taxes Depending on Area or Cost?

Property taxes are levied at the municipal or county level by the local authorities of the taxing jurisdiction in which the property is located. In most states, real estate taxes are also imposed by school districts. Rates vary based on the school district and municipality or county in which a taxpayer resides. When arriving in a property taxation, the taxing authority takes into account both the value of the property and the tax rate levied.

Worth of Real Estate

Property taxes are based on the value of the property being taxed, with the proprietors of the real property being taxed responsible for paying the tax. The taxing authority plays with an appraisal of the value of the actual property and then assesses a millage tax in proportion to that value. Real estate includes property and any improvements to the property such as homes or other structures. Millage or ad valorem tax differs from one taxing jurisdiction to the next. Ad valorem taxes are the major source of income for county and municipal authorities. When appraising the value of real estate to apportion the tax levy, an appraiser researches the present market value or the cost for which the house should sell, sales costs of other comparable homes in the same area, as well as the cost of replacing constructions on the property should they be ruined. Based on the jurisdiction, evaluations could be based on 100 percent of the property’s value or a lesser percentage.

Tax Rate

The real estate tax rate might be expressed as a percentage or as a millage rate. One mill has a value of $1 for each $1,000 of assessed property value. Taxing authorities calculate the real estate tax for real estate by multiplying the assessed value of the property from the mill rate and then dividing by 1,000. As an example, a property with an assessed value of $250,000 in a rate of five mills would equal a tax of $1,250. The purpose of the millage rate is to divide the cost of financing local authorities and schools both among all property owners in the taxing jurisdiction.

Assessed Value

The assessor’s office in a municipality or county has the duty of estimating the value of all taxable real property within the jurisdiction of the regional taxing body. Assessments are typically based on a property’s fair market value, or the quantity of money most buyers will be happy to pay for a property. June Fletcher, a columnist for The Wall Street Journal, points out that tax assessments tend to be lower than those private appraisal companies do if consumers want to refinance or buy a house. Just because a tax evaluation is reduced does not necessarily indicate that your house would only sell for that amount if you set it on the industry. Taxing bodies frequently reduce home assessment values once the market is slow. Improvements to a property that increase its market value generally will increase the property’s assessed value. The size, location and total condition or quality of a property may influence its value. Market conditions may either increase or reduce property values in the same county. Similarly, several kinds of properties within the same general location might be evaluated at several values based on demand for that type of property. Many taxing jurisdictions revalue property annually or at least periodically in order to make any desired adjustments to a property’s assessed market value. The process helps to ensure that taxes are spread fairly among taxpayers.

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