What is property tax? (with photos)

Property tax payments are usually due annually.

Property tax is a tax issued by a government on a person’s real estate or personal property. The property is evaluated to assign a value and then that value is taxed. The amount of tax due is determined by multiplying the fair market value of the property by the current tax rate.

The amount taxed on a given property may change over time based on a revaluation of the property’s value. Typically, property tax does not increase as the home’s value naturally increases; the tax amount generally remains based on the property’s value at the time of purchase. However, major improvements, such as building an annex to an existing house or building a house on vacant land, can trigger a revaluation and therefore an increase in the tax levied. Laws vary by jurisdiction; to be certain of the laws that apply to a particular property, one should consult the appropriate regulatory council or a professional in the field.

Building a house on a vacant lot can result in higher property taxes.

Property tax payments are due annually in most cases, although the annual amount is often split into periodic installments. This can mean quarterly payments, which is common with commercial properties. In the case of homes, it is usually charged in monthly installments, which can be added to the mortgage payment.

This tax is also known by other terms, sometimes called a real estate tax because it is most often levied on real estate. It is also called an ad valorem tax, which simply means that the tax rate is set by value. There are also different types of taxes such as the personal property tax. This is usually assessed and charged separately from property taxes and includes personal property such as automobiles, motorcycles, campers and boats.

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School districts generally receive a large share of property tax revenue.

Local governments, such as cities and counties, derive revenue from the property tax. This income is generally used for government administration and expenses for first responders such as police, fire, and paramedics. It is also used to fund local courts and help pay for services including community programs, parks, civic centers, libraries and schools. School districts often receive a large share of the revenue.

A personal property tax is levied on goods such as motorcycles.

Typically, the state also collects a portion of the tax revenue. In the United States, the power to levy and collect any type of property tax is considered a matter of state rights. It is not readily recognized as one of the powers of the federal government.

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