Beginner’s Guide to Real Estate Taxes

Residential Property Taxes: The Basics

  • Paying property taxes.
  • How they are determined and used.
  • About property assessments & disputing an assessment.

Residential Property & Real Estate Taxes 101

Whenever you own a piece of land, you will be taxed for it. Whether it is commercial property or residential property, there is still a tax to pay, whether it is for a village, town, city, county, or state.

Most residential private property taxes are handled on the local level, going no higher than the county.

Depending on the nature of the business, it may be handled by a variety of entities, including state and federal agencies.

Each specific area and state have its own way of levying property taxes. This article is intended as real estate for beginners and will focus on property taxes as they relate to residential private property.

Your Credit Union financial advisor can also provide a good deal of valuable information; call today to schedule your free consultation.

Levy definition:
To Impose a tax, fee, or a fine

How Property Taxes are Used

Each locale uses the revenue earned from property taxes for different purposes. It can be anything from road repairs and utility upkeep to firefighter salaries and emergency response.

Most areas, however, use the money received from property taxes for school districts. Taxes are levied and then distributed to schools in a district according to the amount of money received from property taxes.

This often puts homeowners in a bind, as most of them want quality education for children, but are reluctant to vote to pass measures that will result in a property tax increase.

How Property Taxes are Determined

Before buying a home, it is important for real estate beginners to understand how the amount you pay in property taxes is decided upon.

Everyone pays a different amount, depending upon how much a home is worth. The tax rate for an area is the same throughout that area, but due to varying home values, the property tax you pay may be a little higher or lower than your neighbors.

If the property tax rate in your area is 9 percent, and your home is assessed at 250,000 dollars, your yearly property tax would be 22,500 dollars. If your neighbor’s home were only assessed at 235,000 dollars, he or she would pay 21,150 dollars in taxes per year.

Many areas have specified periods of time required for a new assessment. Most places require a new assessment every five to seven years. This means that your taxes could go up or down as your property value changes.

What Goes Into a Property Assessment?

There are some guidelines assessors use when determining the value of your home. By being acquainted with these, you will be more likely to understand why your home has been given a certain value. Here are the most common benchmarks taken into consideration when determining a home’s value.

1. Sale price of similar properties in the area:

The assessor will know how much other homes in your immediate area are selling for, and will assess your house to reflect the value of the neighborhood.

2. Property’s historical value:

Records of the property’s value through the years will help the assessor determine whether the home’s value keeps with current trends, and whether the home increases in value over time as a general rule.

3. Cost of replacing the property:

It is possible to determine how much the materials to replace the property, or to add improvements to increase value, would cost. This can figure into the value of the property.

4. Potential value of the property if it is used to make money:

Many people use their property as income through rental or sale, and this value can be used to help the assessor decide how much he or she should value your property for.

Did you know you can dispute a property assessment you believe to be unfair?

How to Appeal your Property Assessment from CBS News

Disputing an Assessment

Because home values are subjective, it is possible to dispute a value. You can speak with neighbors and realtors to discover what homes in the area are valued at.

Recent home buyers and sellers can give you a good idea of what others are paying in property taxes.

Visit your tax board or the local tax assessment office to find out what the procedures are for disputing an assessment you feel is unfair.

Paying Your Property Taxes

As a real estate beginner, you want to be sure that you are paying the taxes on your property. There are a number of ways to do this, including paying to the tax commission quarterly or yearly.

However, the simplest way to pay your taxes is to have them integrated into your home loan. They can be added to your monthly mortgage payment, making it a relatively hassle-free way to make sure everything is taken care of.

With a little savvy, even a real estate beginner can have a good handle on what it takes to get a fair value assessment and know the ins and outs of paying property taxes.

Looking for Property Tax Auctions or Tax Foreclosures?
Here is a list of States from Realtor Magazine with the highest and lowest tax delinquencies

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Influences of Property Taxes

Usually calculated based on the assessed value of the property, is an additional monthly fee you should expect when purchasing a home.

Assessments factor in size, location, age, and condition of the property. Depending on your area the tax rate may also be influenced by the type of property, its use, plus any applicable deductions.

Property taxes can vary significantly from one township to another, even within the same county. This is because each jurisdiction has its own tax rates and methods of assessing property values and therefore property taxes.

These methods are influenced by a variety of factors such as local budget priorities, the economy, and politics.

One More Important Consideration for Beginners

Property taxes will be an additional expense on the overall cost of owning a home. They are a recurring expense that must be budgeted for, along with mortgage payments, insurance premiums, and other household expenses.

High property taxes have been known to make it difficult for homeowners to afford their mortgage payments or to sell their homes at a profit.

There’s Always Debate Over Taxes:

Property taxes are often the cause of heated debates in local politics, as homeowners and businesses may disagree with how tax revenue is spent or allocated.

This can lead ballot initiatives to change tax rates or assessment methods.  Property taxes have significant implications for local economies and our collective quality of life.

Notable Events Throughout History

Tax disputes have been a recurring theme throughout history, reflecting the tension between the need for public services and the desire to limit taxation on the public.

Here are a few examples:

1. Boston Tea Party – A key event leading to the American Revolution.  Protests against British taxation policies, including property taxes in 1773; colonists in Boston staged the Boston Tea Party, dumping tea into the harbor to protest a tax on tea.

2. Proposition 13 – Significantly limiting property tax increases, passed in 1978 by California voters, which had a major impact on the state’s finances. It reduced revenue for schools and other public services.

3. 2011 New Jersey property tax protests – residents in several New Jersey towns protested against what they saw as unfair and unsustainable property taxes, which drew national attention.

4. The pandemic of 2020– The COVID-19 pandemic impacted property taxes, as many homeowners struggled to pay their taxes due to economic hardship. Some local governments offered payment plans or extending deadlines for property tax payments.

5 Property-Tax Changes
Hitting U.S. Homeowners in 2023

From disaster-related rebates in Florida to a mansion tax hike in Los Angeles, new tax bills bring losses and gains across the nation


Learn how to dispute unfair assessments, pay property taxes, and understand what they are used for and how they’re determined.

How are property taxes calculated?

Property taxes are taxes calculated based on a percentage of the assessed value of your property. Your local government sets that percentage.

What are residential property taxes used for?

A large amount goes to schools, but also pay for public services such as roads, utilities, and emergency response.

How often are homes or residential properties assessed?

Typically, every 5-7 years. Property assessments generally factor in sale price of comparable properties, the historical value of the property, replacement cost, and the potential value of the property if used for income.

Can you dispute or appeal a property assessment?

Yes, but do your homework and speak with neighbors, realtors, along with recent buyers and sellers to gather information. Then visit your local tax assessment office to simply ask for the dispute procedure.

Do you have to include real estate taxes with your mortgage payment?

No, property taxes can be paid directly to the tax commission on a quarterly or yearly basis, but many people integrate real estate tax payments into their monthly mortgage payment.

What happens when you don’t pay your property taxes?

Failure to pay property taxes may result in a tax lien placed on your property by your local government. This gives them the legal right to collect the unpaid taxes by selling your property. It is possible to set up a payment plan long before any tax sale of your property.

Do commercial businesses have to pay higher property taxes?

Commercial properties typically have higher property values and potentially higher income-generating capacity. The specific tax rate depends on the local tax laws and regulations in the area where the property is located and can be different than residential real estate taxes. Commercial property taxes are often deductible as a business expense for tax purposes.

Why is the American Dream to Own Your Own Property?

Property ownership or a “piece of heaven” is rooted in the ideals of individualism, independence, and prosperity. The American dream of owning your own home is seen as a symbol of personal success, financial stability, and social status in our culture.

We wish to have a sense of security, stability, and freedom to make decisions about our living space without the constraints of a landlord or contract. The idea of homeownership as a pillar of the American Dream. Desired to be reinforced through government policies, such as mortgage interest deductions and tax incentives.

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