Tax on real estate is typically referred to as a ‘property tax’. The term property for use as a value on which a tax is imposed includes more than just land and buildings which constitutes ‘real property’ but also includes ‘personal property’ such as moveable assets like art, equipment, etc.
Who Levies Property Tax?
Property taxes are levied on the basis of the value of the property on a certain day each year, and therefore is an ‘ad-valorem’ tax. This is a state level tax and is governed by each state’s Property Tax Code and is usually levied at the local government level by counties or municipalities. Thus, there can be variations in the rules for calculation of the tax between states. Though all states impose a property tax on immoveable properties, some states do not impose a tax on personal properties. A tax may also be imposed on transfer of real estate.
Property tax on real estate typically constitutes a significant portion of the budgets of local governments and is used for financing parks, schools, fire and other emergency services.
How Is Property Tax Calculated
The starting point for calculation of property tax is estimating the assessable value of the property. This assessment is performed by a tax assessing officer and records of ownership, taxes paid and previously assessed values are maintained by the state. There is a provision for appeal if one does not agree with the assessed value of one’s property.
A specific property tax rate is then applied to this assessed value to arrive at the property tax due. This rate is also referred to as a millage rate or mill levy with one mill being equivalent to one thousandth of a dollar. The assessed value of the property is multiplied by this millage rate, and then divided by 1,000 to arrive at the tax amount due.
Can You Get Help To Deal With This?
There are professional tax consultants who specialize in property taxes and can provide assistance especially if you wish to appeal against a property valuation assessment.
In case of transfer of real estate, the seller is required to pay the property tax up to the date of the sale and the buyer from the date of sale.
As mentioned above, the property tax code will differ from state to state; therefore you will need to look up the applicable code for the state you own property in to determine the tax bill you have to foot on this account.