When looking for a retirement destination, it's important to understand your total tax burden in a new area. However, it can be difficult to make sense of how property taxes are determined. The amount you will pay is based on many factors, including the appraised value of your home and any qualifying exemptions.
Property taxes are assessed on homes to help fund many local services, such as education, transportation, emergency response, libraries and parks. Various local and state councils and legislatures work together to decide how much tax revenue will be needed for the coming year. The amount you will pay on your home, is usually based on a calculation of the mil levy and your property value.
The tax rate levied on property is known as a mil levy, with one mil equaling one tenth of a cent. For example, one mil of $1,000 in property value would equal $1 in taxes. All of the levies in an area are added together and set against the area's total property value to determine the percent of property tax needed.
Imagine an area where the total assessed property value is $100,000,000. If the city needed $1,000,000 in revenue, they would divide $1,000,000 by $100,000,000 and set a property tax rate of 1 percent. If the school district were to need $3,000,000 (3 percent) and emergency services were to need $1,000,000 (1 percent), those levies would get added to the city's 1 percent for a total mil levy of 5 percent.
Those calculations determine the total percent of property tax which will be collected. The tax amount on your property is then calculated by multiplying the mil levy by the assessed value of your property. However, the assessed value of your property is not the same as its market value.
Your property is periodically assessed to determine its value for tax purposes. The assessor considers many different factors when evaluating your home. Some of these factors include recent sales of similar homes, what it would cost to replace your home and the estimated maintenance expenses for your home. These factors determine your home's market value, which is then multiplied by an assessment rate which is set by your tax jurisdiction.
If your home's market value is determined to be $250,000, and you live in an area with an 8 percent assessment rate, your assessed property value would be $20,000 ($250,000 multiplied by 8 percent). Now, multiply that assessed property value of $20,000 by a mil levy of 5 percent, and your property taxes would be $1,000.
Depending on the area where you live, you may qualify for some property tax exemptions. Many states offer full or partial exemptions for homeowners over a certain age. There may be exemptions for disabled homeowners as well. As soon as you qualify, contact your Tax Assessor's Office or Tax Collector's Office to file a claim for your exemption.
There are some steps you can take to find out if your property taxes are too high. Depending on where you live, property assessments may not be done every year. If the market has declined since your last assessment, it may be time to request a reassessment. Start by doing your own online research into your home's value. Look at recent sales through online sites like Zillow.com or ask for help from the real estate agent who helped you buy your home. If you come up with a market value that is lower than the one listed on your assessment, contact your County Tax Assessor's Office or Tax Collector's Office to request a reassessment. Some counties even let you request a reassessment online.
The calculation of property tax can be confusing, but understanding how it works will help ensure that you are paying the right amount.