All homeowners need to . The Government requires it. It is essential for every homeowner to know how their Real Estate Taxes are calculated. Home ownership takes a huge toll on any homeowner’s finances. Knowing how much they’ll have to pay for taxes is the only way they can better manage their finances.
Here’s how to properly calculate the Real Estate Taxes.
Know the assessed value of your property
The assessed value will serve as the guide for the price you can realistically sell your house for. Knowing the assessed value gives you a picture of how much you’ll have to pay in Real Estate taxes. For discussion’s sake, let’s say they that a certain property’s total assessed value is $300,000. This means that the land and improvements made to the property have a total value of $300,000. Land improvements refer to the structure(house or commercial building) built on the Real Estate property to increase its overall value.
Homestead exemptions are provisions in the law that lowers the amount you’ll have to pay in Real Estate Taxes. They are tax breaks to entice people to buy their first homes to stimulate the US economy. The rate varies by state. For example, your State offers a tax exemption for the first $30,000 of your home’s total assessed value. It means $300,000 – $30,000 = $270,000. The amount of $270,000 is the value that the State can charge you for Real Estate Taxes.
Mill levy or millage Tax
The mill rates represent $1 for every $1000. It means $270,000 divided by $1,000 is equal to 2,700. If you’re State charges a rate of 2.5 mills, you have to multiply 2.5 with 2,700, you’ll come up with the figure of $6,750. In simpler terms, it means the local tax rate in your State is 2.5%. Your property’s value after the exemption is charged with a 2.5% Real Estate Tax. So, $270,000 multiplied with 2.5% or 0.025(the decimal form for 2.5%), you still come up with $6,750. The formula is (total assessed value – homestead exemption) * tax rate or (total assessed value-homestead exemption/1,000) * mill levy.
The Real Estate taxes you’ll have to pay annually varies from time to time. The total assessed value of your property will change whether you have made any improvements or not. It will rise and fall together with the Real Estate Market. Assessors rely on market data to determine how much your property is worth during that time. This process is not perfect.
If you ever feel that you’re paying too much on your Real Estate Property taxes, you can always file for refunds. You must first file an abatement request. The local tax agency will review the valuation of your property. If they find out that you’re paying more on Real Estate taxes than you should, expect to get refunds.