How to Calculate Property Taxes

If you can calculate property taxes for your real estate, you can better plan your yearly budget. If you are purchasing a new home or simply want to find out for the upcoming year, there are some things you should know before you set out to calculate property tax.

What Is Property Tax?
Before you plan to make property tax payments, it might be helpful to understand the definition of property as the government sees it. Property is generally broken into three categories. Land is the first category, and it generally means undeveloped, grazing or farm land. Improved land is property with dwellings on them (either residential or commercial). The final category is personal, and includes items that can be transported (such as boats or RVs). When property is assigned a value, the government can tax it.

Mill Rate
When thinking about property taxes, you need to understand the mill rate. The mill rate is a simple ratio of a dollar to each thousand dollars of the property's value. A millage rate means that it is one-thousandth of the value. Mill rates differ among towns, cities and counties and are officially set by that governing body.

To figure out the property taxes for a property, take the value of the property, and multiply it by the mill rate. Then, just divide that total by 1, 000 for the property tax. For example, if a property is officially assessed at $200,000 value and the mill rate for that city was 10 mills, that property owner would pay $2,000 in property taxes for the year. This simple formula is how property taxes will be determined for your city or county.

Tax Assessor
The important and often subjective part of calculating property taxes is determining the value of the property. A tax assessor is someone who ascribes property tax value to property to determine the taxable amount. This value is usually different from the real estate value, although many people believe they are one and the same. Tax assessors usually work for the government directly or are contracted to work for city or county governments. For that reason, you need to factor in any improvements you made on the house because that might raise its property tax value.

Understanding the mill rate and the role of the tax assessor can help you either save up for your property taxes or avoid moving to an area with high property taxes. Either way, be sure to factor these taxes into your yearly budget if you are a homeowner.

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