Why Do You Pay Real Estate Property Taxes? How Do They Work?
If this is your first house, you might not understand why you pay property taxes and what they are used for. You know about income taxes and sales taxes, but property taxes typically have different uses than those that are used for the manufacturing and the retail industries. Property taxes actually help the local and state governments as a whole.
Property taxes are used by the government to pay for publicly used programs and services that everyone can use. For example, infrastructure and repairs to public buildings, social service programs, government-funded food banks, and more.
How do real estate property taxes work? Here is some information that can help.
Taxes Are Based On Property Itself
Real estate property taxes are based on the actual property that exists on the land. This means any structure, for example, your house, garage, a barn, or storage shed for a farm are all subject to being taxed. In some cases, the size of the land can be taken into account with property taxes as well. In some cases, personal property can be included in a real estate property tax assessment, you can check with your property tax service to see if any personal items are included in the assessment.
If you own a commercial property that you rent out, this is also taxed. This is typically taxed based on the amount of rental income you bring in and the location of the property.
What Do The Taxes Go To?
Real estate property taxes typically go to local services such as fire departments and their equipment, law enforcement and the hiring of new police officers, and the building and maintenance of schools. Roadwork completed is also funded by real estate property taxes and this includes the building of new highways and repairing potholes and bridges.
How Are Taxes Assessed?
Your tax levels are determined by a tax assessor who is an elected or appointed person who assesses the property value of every eligible property in a given area. Tax assessments are made by comparing the properties of similar size and value and seeing what their market value is. So for example, if two houses are of similar size with a similar lot size, these two property owners will most likely pay roughly the same amount of tax.
A tax rate may change over time, and this greatly relies on other types of taxes and funding a local government receives. A government will take into account what funding they have from other sources which can include sales tax and state funding. They will then look at the local government's budget for the year and find out how much they need to fill any gaps. This is where property taxes come in to fill that gap.
To get help with your property tax, contact a property tax consultant in your area.