How Do Property Taxes Work?
When you buy a home, it’s important to know how much you will be paying monthly and yearly for costs associated with the mortgage and property. This will allow you to set up monthly budgeting and be prepared for the most daunting payment, taxes.
If you’re moving into a new home or maybe looking to refinance, use a house payment calculator to calculate your monthly payments and get a good idea on how much you will have to pay on your mortgage. Then you can factor in your property taxes. This is always a good idea before moving into a new home to help you understand if you can afford it.
Property taxes are calculated using the value of the property. Percentages may be determined by the city or area that you live, but it will be based on the value of your home.
So how do you determine the value of your property so you can calculate how much you will potentially owe in taxes? There are a few ways to go about that.
The assessor determines the value of the property by looking at recent transactions in the region. The location, the condition of the property, any upgrades, and the general market circumstances are all factors to consider. After that, the assessor adjusts the values to reflect particular changes to the property, such as new additions and renovations.
This is when the assessor estimates the worth of your home based on the cost of replacing it. Assessors evaluate the amount of depreciation that has occurred and how much the property would be worth if it were unoccupied. In the case of newer properties, the assessor subtracts any reasonable depreciation and considers the expenses of construction materials and labor. These figures would be factored into the final evaluation of your home.
This technique is based on how much money you might make if you were to rent the home. The assessor analyzes the expenses of maintaining, managing, insurance, and taxes, as well as the return you may reasonably expect from the property, when using the income method approach. After establishing the property’s market value, the assessed value will be calculated by multiplying the actual value by an assessment rate. That rate is a fixed proportion that varies by tax jurisdiction and might be anything below 100%. The assessed value is multiplied by the mill levy to determine the amount of property taxes owed.
For all of the methods laid out above, your final value will be multiplied by the tax percentage to determine how much you will ultimately have to pay in property taxes.