Property Tax – How Local Government Determines the Tax Rate

If you own a property, you must be paying property tax every year. The property tax rates keep on fluctuating and these rates are determined by the local government. If you’re looking for property tax relief, you’d need to get knowledge about the system and process of appeals. As a property owner you would need to go to your city council with an argument that the current assessed value is high and unwarranted. The tax rate varies from one state to another. Do you know how your local government determines the tax rate?

Only two things determine the property tax rate. First, the tax amount, you’re paying for your property i.e., the tax rate declared by the local government and second is the value of your property. Only real properties are assessed to determine the tax rate. Real properties can be vacant land, offices, buildings, farm lands, houses, etc. It doesn’t mean that all real properties are considered. Government owned properties and religious properties come under the category of real properties however local government does not consider them while determining the tax rate.

Generally, the assessment of any property is based on the market value of the property. Market value is the possible selling price of your property. The process of assessment is carry out by the assessors appointed by the local government. Remember, your assessment will not get pass, if market value of your property is equal to the assessment value. To finalize the tax rate, local government divides it into different municipalities. In case, you’ve property in two different cities, you’re more likely to receive an appointment.

If your business or office is in a historic building, then the property tax could be high or could be very low as tax laws and rules are not same in every state. In case, the budget of the local government increased, the property tax will also increase. The assessors determine the assessment ratio which varies from state to state. Same tax rate varies from state to state. Tax rate also varies in building types. Therefore, a residential home will be taxed at a different rate than a commercial building. However, in some cases residential home also taxed at a higher rate. For example, if a residential home is being used as rental property and you’re earning from it.

Like assessment ratio and tax rate, property tax valuation is also done. If you think valuation is not correct, you can only challenge the market value of the property. In front of the city council, you cannot argue the assessment ratio or the tax rate. But yes, you can argue in one case, if they have put your property in wrong category and assessed wrongly and calculated tax incorrectly. Good knowledge about the properties will be plus point, if you’re arguing the assessment ratio and tax rate. If you don’t want to save your hard earned money, don’t appeal or argue. But, the process is not hard to understand!