What is Real Estate Property Tax?

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What is Real Estate Property Tax? Real property taxes are taxes that are derived from the value of real property, which include all land and any permanent structures that are attached to the land. This is how various governments, such as cities and counties raise money to pay for things like road maintenance and fire and police protection, among other services. The value of the real property is assessed by a tax assessor. Real property that is owned by the government or a religious organization is exempt from property taxes. There may be other partial exemptions granted in some cases, like those granted to veterans.

     The market value of real property is used to determine the tax assessment. The tax assessor, who is either elected or appointed to office, uses various methods to determine the market value of a property. For residential property, the comparison method is used, which looks at the sale prices of properties that are similar to it. Different methods are used to determine the market value of commercial property. Real property is always assessed at the value of the current use of the property. If a real property owner feels that the assessment of their property is unfair, there are usually channels to go through within a government or municipality to request a re-assessment.

     Once the property is assessed, a tax rate is then based upon the tax levy, which is based on the budget of the government or municipality, minus any other income such as aid from the state, or sales tax income. The rest of the budget must be gained in the payment of property taxes, and is called the tax levy.

     The government or municipality may assess property at less than 100 percent of it's market value. Usually there is a uniform percentage which is applied to all of the real property within a government. If the percentage, is 50 percent, for example, and the market value of a house and land is $200,000, the assessment for that property would be $100,000. The tax rate for that property would be measured by dividing the tax levy by the assessed value of real property within that municipality. The amount of the tax bill is based on the assessment and the tax rate, which is in turn determined by the tax levy. Property taxes paid by a homeowner can be deducted annually when filing an income tax return.

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