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an overview of property taxes

Property taxes are paid on property owned, either by an individual or a legal entity. How much property tax you are required to pay is determined by the local government where the property is located. Typically, the assessed taxes are used to fund things like water and sewer improvements, education, road construction, and public services like law enforcement and fire protection. Here is a brief overview of property taxes and what they mean for your taxes. 

How is property tax calculated? 

The amount of property tax you are required to pay depends on the value of your property, including the land and buildings sitting on it, as well as your assessed property value and the county’s projected mill tax. A mill tax rate is the sum of all tax rates levied on your property value.  

The mill tax is multiplied by the property value to calculate your assessed value of your property, which is then used to find the fair market value of your property. This figure is multiplied by an assessment rate to calculate your tax bill.  

Your property tax bill may be higher or lower than your neighbor’s. For example, if your plot of land is larger or if your home’s assessed value is higher, your tax bill will be higher than your neighbor’s. In some rare cases, your neighbor’s property may fall in a different jurisdiction with a lower mill tax rate, resulting in a smaller tax bill.  

Who must pay property taxes? 

Typically, most owners of property must pay property taxes, whether they are an individual or legal entity. However, there are some groups or property types that are exempt. These include senior citizens, those with disabilities, and military veterans. Additionally, there is a homestead exemption that reduced property tax bills. The rules for exemption vary by state or municipality so it’s best to check with your local and state government. Also note that the agencies that collect property taxes will not always notify you if you do qualify for an exemption and you may need to apply for it on your own.  

What happens if I do not pay property taxes? 

Put simply, failing to pay property taxes can result in a lien on your home. A lien is a legal claim against your property that can be used as collateral to repay the debt owed. If you still do not pay off the balance, the taxing authority can legally sell your home, or sell the tax lien. In this case, the purchaser of the lien can have your home foreclosed or use other methods to obtain the deed to your property. The consequences vary by state.  

Tax Relief for Homeowners 

It goes without saying that all property owners should stay on top of their property tax bills. Failing to pay can have serious financial consequences but choosing to pay can also have other financial benefits during tax time. Homeowners who itemize their deductions can deduct property taxes paid on a primary residence and any other real estate owned. You can deduct up to $10,000 in state and local income taxes, which includes property taxes. If you need tax help, call us at 800-536-0734 for a free consultation with one of our knowledgeable tax professionals.