How to Find Out If Your Property Tax Bill Is Too High?

What Is Property Tax?

Property tax, also termed real estate tax, is an ad valorem tax that homeowners pay. In simpler terms, your property’s assessed value determines the real estate tax you have to pay.

The local or state government levies this tax. It is used to build schools and roads, and fund services like fire departments and the police force.

If you want to save some amount on property tax, homeowners have many tax deductions. However, ensure you maintain records of property tax payments made during the year to claim these deductions.

When to Pay Property Tax?

Property taxes must be paid annually. You can also pay them every month if your county laws permit. Additionally, you pay property taxes in arrears. This means you’ll pay 2023’s taxes in 2024.

The local authority will reevaluate the tax-assessed value of your property every 1 to 5 years. That’s why, before you file your taxes, check the updated numbers.

How Are Property Taxes Calculated?

The local government determines how homeowners’ taxes are calculated. The calculation method differs depending on the region, but here’s how you can get an estimate:

Step 1: Find Out the Assessed Value of Your Property

The assessed value is an estimated amount determined by your local tax assessor. This value is the basis on which your real estate tax is calculated.

You can check your local government’s website or your property tax bill to find the assessed value of your home.

Step 2: Add Your Mill Rate

The mill rate is the sum of all the mill levies or millage rates of a particular tax jurisdiction. Local governing authorities levy this amount on every $1,000 of your property’s assessed value. For instance, with a 0.01% mill rate and a $400,000 assessment, your millage would be $4,000.

Step 3: Deduct Any Tax Exemptions

Here are some common property tax exemptions you can use to reduce your tax amount:

• Income-Based Exemptions: Offers relief to homeowners with low incomes or experiencing financial hardship.
• Renewable Energy Exemptions: Provides incentives for homeowners who install renewable energy systems, like solar panels, on their property.
• Homestead Exemption: Applies to homeowners who use the property as their primary residence.
• Senior Citizen Exemption: Offers tax relief to senior citizens over 65 years of age.
• Disability Exemption: Applies to those who fulfill the homestead exemption and are totally disabled.
• Veterans Exemption: Provides relief to veterans who meet specific criteria, such as having a service-related disability.

» Property Taxes By State: Check out the tax rates in your state.

How Are Property Taxes Paid?

Generally, there are 3 ways you can pay your property tax bill:

1. Through Monthly Mortgage Payments

If you have a mortgage on your home, the lender estimates your tax bill and divides it by 12. This amount includes 4 costs – principal, interest, tax, and insurance, known as PITI.

If the lender overestimates your tax bill, you get a refund. Similarly, you have to pay the outstanding amount if they underestimate your tax bill.