What is Property Tax?

Published by Thomas Herold in Laws & Regulations, Real Estate

'Property Tax' is explained in detail and with examples in the Laws & Regulations edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.

A Property Tax refers to a type of tax levied by a government in their jurisdiction on the personal or real estate property of an individual or business. The government will assess the value of the property for the purpose of taxing it. The authorities will then determine how much taxes the owners owe by multiplying the property’s fair market value times the then current tax rate.

What makes property taxes so frustrating to so many different people is that the amount which the tax is based on may be changed at will over time when the governing authorities choose to reassess the value of a property entirely at their own discretion and according to their time table. Usually the property tax does not increase alongside the value of the property or house. Instead the tax value usually remains based on the property’s value based on the point and value when the owner originally purchased it.

This is not the case when the owner engages in significant improvements. When the owners choose to construct additions to homes or instead to do major remodeling activities, this will often times lead to a reassessment of the value of the property in question. Such a reassessment will generally raise the tax amounts levied.

The laws on the subject are different by every jurisdiction and according to each governing authority. In other words, tax assessment laws that pertain to a given property may not be the same as those on a comparable property lying in another city or state.

Most property taxes become due once per year. It is possible for the yearly amounts due to be divided up into quarterly or otherwise periodic installments. Commercial property owners often pay according to this time table. Where homes are concerned, this can be assessed and paid in monthly installments. This is often simply added on to mortgage payments every month.

The property tax has other names as well. It is sometimes called Realty Tax since it is commonly assessed on real estate. Sometimes they call it ad valorem tax. This means that the tax rate will be set by the value of the land itself. Conversely, there are various other types of taxes. One of these is personal property tax. It is commonly charged and levied differently than by taxes assessed on real property. Such possessions as campers, motorcycles, boats, and cars are affected by it.

It is not usually federal governments which assess such property taxes. Rather local governments like counties, cities, and states gather much if not most of their operating income from these taxes. Such revenues as those generated by property taxes they will commonly deploy to pay for the administration costs of government as well as the costs associated with hiring, training, equipping, and maintaining the critical first responder personnel and vehicles. This includes such necessary services as paramedics, firefighters, and police. Local courts will also be paid for with these revenues, along with such important community services as libraries, civic centers, schools and community parks. School districts in fact gain a huge part of this property tax revenue each and every year.

The states also commonly garner some share of this property taxes revenue. The ability to assess and collect this type of property tax resides with the states alongside the local governments within the U.S. The Federal Government does not have such property taxing rights or tax collecting powers.

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The term 'Property Tax' is included in the Laws & Regulations edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.