Property taxes are recurring expenses homeowners should be prepared for. Yet, it is common that many people find it challenging to understand what their property taxes entail. That is why the local government will always conduct a property tax assessment to let homeowners know that they owe. That way, the county or local government can also determine how much a property is worth. In other words, this means the assessed value and will be multiplied by the property tax rate for property tax estimation.
Determining Property Tax Bill
Property taxes vary broadly according to policies set by the government. Even still, the amount people may differ based on the property assessment. Aside from the county or city government, the state can also influence property tax assessment. Some states update their estimates annually. On the other hand, others may have varied schedules, such as every four years. So, the homeowner should check with the taxing authority to find out when the assessments are made. But what influences how people determine property tax bills?
The Assessed Property Value
One of the factors used in property tax estimation is the assessed property value. And this is the work of an assessor from the local government. While at it, they will look at influencing considerations within the neighborhood. These can include what nearby homes have been sold or assessed for.
Exemptions Qualified For
The other factor is exemptions one qualifies for in their taxing jurisdictions. Often, some areas provide exemptions for portions of the home value. For instance, some states offer exemptions if one uses the home as a primary residence. With this, some significant amount of the home’s assessed value can be excluded from the calculated tax. Other exemptions work for a particular group of people like seniors and disabled veterans.
The Property Tax Rate
The property tax rate also has a lot to say on the overall property tax bill. Often, the tax rate is set by the local taxing authority, typically the county or the state. Yet, another pertinent question arising is how will the property tax be assessed? Here are the standard methods.
This method, sometimes referred to as the cost approach, considers how much it will cost to rebuild the property. This is usually based on the current market for materials and labor and other issues like depreciation and land cost.
Sales Comparison Method
Another technique used is sales comparison, also known as the market approach. The method looks at the recent sales prices for comparable properties within the area. After that, the features and improvements of the property are compared to what is included in recently sold homes. The assessor will then adjust it accordingly, and it is commonly used for residential property assessment.
The other means used here is the income method and is famous for business or commercial properties. It looks at how much income will be realized if a property is rented out. Not only that, but the assessor will also consider other things like operating expenses. Other items considered include insurance, financing terms, and maintenance cost.