Welcome to the world of property taxes. As a renter, you probably didn't give them a second thought. Now that you're experiencing the benefits of homeownership for the first time, you'll see a bill for property tax for as long as you own the home.
Property taxes are the costs charged by local jurisdictions (state, county, municipal, township, school district, or special district) for your house and plot of land within the jurisdiction.
Your property taxes support local government operations and critical infrastructure like roads, water, sewer systems, and schools.
To understand how property taxes work, you should know how they're calculated. Your county assessor evaluates each property based on its type and any improvements, and assigns a property value. Typically, properties are assessed every one to five years to capture any change in value and to ensure the property tax reflects that change.
Different property types are subject to different levels of tax. For example, vacant land has a lower assessed value and tax bill because there are no structures or improvements. A comparable piece of land with a house on it has a higher value, called the improved value. As you might expect, properties with access to public services, such as water and sewer, receive higher assessments.
Property is taxed on a percentage of its assessed value. That percentage is called the mill rate, mill levy, or millage tax. One mill equals 1/10th of one cent. If a property is assessed at $100,000, a levy of one mill would equal $100.
The city, county, and school district have the right to tax the properties within their area. These taxes, often known as levies, add together to arrive at the total mill rate for any given property.
County assessors first must determine the market value of your home. There are three different methods for this, and they can use a single method or a combination of the three.
After determining the home's market value, the assessor applies an assessment rate to find out the amount of your home's value that can be taxed. This is a percentage that varies by tax jurisdiction; it could be anything below 100%. The assessor then applies your local mill levy to determine the amount of property tax due.
Finally, the assessor sends you the assessed value of your property and issues an updated tax bill.
Homeowners typically pay property taxes one of two ways:
1. The homeowner can pay quarterly or in full. Each year's taxes are paid the following year. Make sure you factor this into your household budget.
2. Many mortgages include property taxes in the monthly payment amount. The mortgage servicer sets aside what the homeowner has paid toward property taxes and pays on the homeowner's behalf when the bill comes due.
Yes, homeowners can challenge their property taxes, at least to a point. The first step is to understand the basis for your tax assessment and review it for any errors. You can then ask the assessor to make the correction or conduct a re-evaluation. If you find an error, your jurisdiction is required to correct it.
All property assessments are public knowledge, and anyone can access the information. You can visit the town hall or search your county assessor's online site to see neighboring homes' assessed value.
You don't have to allow the tax assessor into your home. However, doing so might result in the assessor assuming your home is in a certain condition that would lead to a higher assessment. It could be in your interest to invite the assessor inside. Some homeowners walk through the house with the assessor to point out anything that may be relevant to the assessment.
If you or your property fall into certain categories, you may qualify for a tax exemption. Some municipalities lower the tax burden for:
To find exemptions available in your area, check the websites for your county's assessor and your state's department of revenue.
If you've done all you can and the assessor still won't change the assessment, you can file a tax appeal. We recommend you consult a lawyer for this. The county board will then review your property information, compare it to the most recent assessment and tax bill, and decide. You may learn about the decision immediately, or it could take a few months.
When you understand how property taxes work, you can keep an eye on your tax assessment to ensure it's error-free and consistent with similar properties near you. If you find an error or can make a case that your assessment is unreasonable, don't hesitate to correct the record and try to lower your tax bill.
Disclaimer: Redfin does not provide legal, financial, or tax advice. This article is for informational purposes only, and is not a substitute for professional advice from a licensed attorney, financial advisor, or tax professional.