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Key Things to Know About Paying Property Tax

Property tax, also known as ad valorem tax, is levied on real estate and other property. Usually, local governments assess the property tax based on factors such as the property’s location and worth. Furthermore, failing to pay the property tax may result in a tax lien (a legal claim made by the government on the property), and in case of a sale, the government may receive some or all of the proceeds.

How does property tax work?
In most circumstances, property tax is determined by multiplying the property’s value by the tax rate. But various factors control these two components of the tax bill.

Property value
Assessors, also known as appraisers, evaluate every piece of real estate property and land in a district. Using sophisticated mapping software, they then maintain databases of the value of the local property. In most cases, the assessed value of the house is lesser than the market value of the property. But it can change depending on factors such as permit applications from remodeling projects, reports from neighbors, and inspections. In addition, machinery, cars, and other property may also be subjected to personal property tax.

Tax rate
Usually, the real estate tax rate is based on the “millage rate.” In the country, one mill is equal to one-thousandth of a dollar. Hence, one’s tax rate may not be conveyed as a percentage but as a particular number of mills. Moreover, in some cases, the tax authorities may apply the tax to only a part of the home value. This can drastically reduce the bill and save one a lot of money.

Can the property tax be lowered?
In circumstances where one disagrees with the property tax bill on the house, they can contest it by challenging the property’s assessed value. If successful, the appeal could result in a reduction of the property tax bill amount. However, one must ensure the following if one wishes to challenge the assessed value before paying property tax.

Accuracy of assessment data and its match with the property details
Comparable listings or comparable sales of the property in the same area

Additionally, one can also call the assessor’s office and raise a dispute mentioning that the other homes with similar tax values are much better. Furthermore, an independent tax appeals board can be approached to pursue the case.

How to pay property tax?
Typically, one can pay the property tax bill in two ways. These include:

Principal, interest, tax, and insurance (PITI)
If one has a mortgage, then it’s likely that the property tax may be rolled into the monthly mortgage payment. In cases like these, the lender usually divides the estimated property tax bill amount by 12 and includes it in the monthly payment. Moreover, if one ends up paying more than the property tax bill amount, then a refund is initiated.

Pay the local tax office
In cases where the property tax isn’t paid as a part of the monthly mortgage payment, one can also pay the tax office directly. They might receive a bill in the mail that includes the payment directions. The mode of payment, on the other hand, might differ depending on the area one lives in. Some of them are:

By money order or check
Online – using a debit card or credit card
Online – using an eCheck
By telephone – with the help of a credit card or debit card

Moreover, one can also choose how they wish to pay the property tax bill – quarterly, monthly, or biannually.

What are the exemptions from property tax?
Some people may find paying property tax a financial burden. But with certain exemptions, deductions, and credits, the amount can be lowered. However, these exemptions may differ from one taxpayer to the other.

Property tax circuit breaker programs
These programs may help disabled people, seniors, and low-income residents to reduce the amount of property tax that needs to be paid. Furthermore, it provides a state-funded tax credit to the abovementioned taxpayers whose property tax exceeds 3% and 6% of their household income.

Tax deferrals
These property tax deferral programs enable taxpayers aged 65 and above or those whose household income is $60,000 or less to defer a portion of their property tax until later. This enables a relative decrease in their tax liability and provides an option for paying taxes. In these circumstances, the taxpayer usually pays an amount equal to 3% of their preceding year’s household income, and the state pays the rest.

Conclusion
Everyone who owns a piece of property – house, land, or farm must pay property tax to the state. The property tax bill amount may vary from state to state, and up to $10,000 can be deducted. Further, if the property tax amount is included in the mortgage payment, the lender must pay the property tax on the taxpayer’s behalf before any deductions can be claimed.

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