Property Tax, Taxes Property

Property Tax, Taxes Property: Whats in a name? How does this controvertial can complicated system of taxation work?

Property tax, or millage tax, is an ad valorem tax that an owner pays on the value of the property being taxed. There are three species or types of property: Land, Improvements to Land (immovable manmade objects; i.e., buildings), and Personalty (movable manmade objects). Real estate, real property or realty are all terms for the combination of land and improvements. The taxing authority requires and/or performs an appraisal of the monetary value of the property, and tax is assessed in proportion to that value. Forms of property tax used vary between countries and jurisdictions.

The special assessment tax may often be confused with the property tax. These are two distinct forms of taxation: one (ad valorem tax) relies upon the fair market value of the property being taxed for justification, and the other (special assessment) relies upon a special enhancement called a “benefit” for its justification.

The property tax rate is often given as a percentage. It may also be expressed as a permille (amount of tax per thousand currency units of property value), which is also known as a millage rate or mill levy. (A mill is also one-thousandth of a dollar.) To calculate the property tax, the authority will multiply the assessed value of the property by the mill rate and then divide by 1,000. For example, a property with an assessed value of US$ 500,000 located in a municipality with a mill rate of 20 mills would have a property tax bill of US$ 10,000.00 per year.[1]

In the United States, ‘property tax’ on real estate is usually assessed by local government, at the municipal or county level. A very important benefit of a tax on property over a tax on income is that the revenue always equals the tax levy, unlike income or sales taxes, which can result in shortfalls producing budget deficits. The property tax always produces the required revenue for municipalities’ tax levies.

The assessment is made up of two components—the improvement or building value, and the land or site value. In some states, personal property is also taxed. A tax assessor is a public official who determines the value of real property for the purpose of apportioning the tax levy. An appraiser may work for government or private industry and may determine the value of real property for any purpose.

Tax assessor offices maintain inventory information about improvements to real estate. They also create and maintain tax maps. This is accomplished with the help of surveyors. On tax maps, individual properties are shown and given unique parcel identifiers. The tax maps help to ensure that no properties are omitted from the tax rolls and that no properties are taxed more than once. Real property taxes are usually collected by an official other than the assessor. Examples of a proposed reform to a property tax on real estate to one that falls more heavily on the land portion is provided at the following sites as sponsored by the The Henry George Foundation. Maryland, King County, Washington, Indiana, New Jersey, New York.

The assessment of an individual piece of real estate may be according to one or more of the normally accepted methods of valuation (i.e. income approach, market value or replacement cost). Assessments may be given at 100 percent of value or at some lesser percentage. In most if not all assessment jurisdictions, the determination of value made by the assessor is subject to some sort of administrative or judicial review, if the appeal is instituted by the property owner.

Ad valorem (of value) property taxes are based on fair market property values of individual estates. A local tax assessor then applies an established assessment rate to the fair market value. By multiplying the tax rate x against the assessed value of the property, a tax due is calculated.

Property taxes are imposed by counties, municipalities, and school districts, where the millage rate is usually determined by county commissioners, city council members, and school board members, respectively. The taxes fund budgets for schools, police, fire stations, hospitals, garbage disposal, sewers, road and sidewalk maintenance, parks, libraries, and miscellaneous expenditures.

Relatively recently, US property tax rates increased well above similar rates in other countries[citation needed], and exceeded 5% in some US states, thus becoming the main dwelling expense after construction.

Property taxes were once a major source of revenue at the state level, particularly prior to 1900, which was before states switched to relying upon income tax and sales tax as their main sources of revenue [2].

After determining a budget at the municipal level, a legislative appropriation determines how the monies will be collected and distributed. After that, a tax authority levies the tax. An appeal is permitted. Equalization is then considered by a board of equalizers to assure fair treatment. Then a tax rate is determined by dividing the municipal budget by the assessment role of that municipality. Multiplying tax rate by the assessed value of one’s property determines one’s tax rate.

Some jurisdictions have both ad valorem and non-ad valorem property taxes (better known as special assessments). The latter come in the form of a fixed charge (regardless of the value of the underlying property) for items such as street lighting and storm sewer control.

In the United States, another form of property tax is the personal property tax, which can target

* automobiles, boats, aircraft and other vehicles;
* other valuable durable goods such as works of art (most household goods and personal effects are usually exempt);
* business inventory;
* intangible assets such as stocks and bonds.

In some states, it is permissible to separate the real estate tax into two separate taxes—one the land value and one on the building value. (See Land Value Taxation.)

Personal property taxes can be assessed at almost any level of government, though they are perhaps most commonly assessed by states.

Key Words:

Taxes Property, Property Tax, Property Taxes

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