If you are a homeowner, then like millions of people, you have had to go through the process of property tax assessment. Many have uncertainty about how property assessment works, but the results of that assessment will determine how much you as a homeowner will have to pay in taxes to your local government.
From the standpoint of the localities that levy these taxes, this assessment is generally a plus because there is no chance for a shortfall as you might see when income tax or sales tax is applied. As far as the assessment itself goes, much depends on how the property is valued in the given locale. Assessors may use market value to determine tax cost; they might also seek to use replacement cost or income approach in order to come up with a figure. The assessor will determine just what the true value of the property is, and then will levy a tax bill on the property owner.
Value taxes (known as ad valorem) on property are done on a basis of what is considered to be the property’s fair market value. Once that value is determined, an established rate of assessment is placed upon the property, and multiplied along with the value – leading to the calculation of your tax rate. In some states, property taxes have risen to more than 5%, and are considered one of the largest housing expenses in existence. At one time, these taxes were one of the chief revenue sources for states, until sales and income taxes became the way of generating revenue in most cases.
Homeowners aren’t the only ones affected by property tax assessment – the revenues that come in affect schools, hospitals, law enforcement, and general local maintenance as well, among other things. Council members and school boards even have a say in how these taxes are assessed and levied in some places. Once a budget has been determined, legislators decide how the money gets collected and distributed. There is also the personal property tax, which can cover items such as vehicles, stocks and bonds, and certain business inventory. Usually, these taxes are assessed by states.
Remember that in any event, your property tax assessment rates and methods depend on where you live – state, county and locale.