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Calculate Property Tax
Regardless of what city or state you are in, the process to calculate property tax all starts off with what your city thinks your property is worth. I.e. their opinion of its market value. They than take this market value and apply an assessment ratio to calculate property tax, on an annual basis.
Note there are a few different names that cities use to describe the assessment ratio and assessment ratios vary from town to town and state to state, so don't get thrown off. Cities take the market value and apply the assessment ratio to that value, than they apply the actual tax rate to that amount to figure out the annual taxes.
Fair market value x assessment ratio= assessed value x tax rate = annual property taxes...
For example:
$1,000,000 market value x 80% assessment ratio = $800,000 assessed value.
Now take the $800,000 assessed value and multiple that by your real estate tax rate, which is usually in the form of a millage rate or dollar amount per thousand. For example if your city charges 25 mills it would look like.
$800,000 x .025 (note you have to move the decimal point over) = $20,000 of annual taxes.
Say your state charges $25, per thousand of assessed value, it would look like this:
$800 (per thousand) x $25 = $20,000 per year of annual real estate taxes.
Calculating Property Tax
Why do cities make this so confusing? Surely there's an easier way to calculating property tax. Many people believe that it's because cities think more taxpayers would appeal their taxes, if they understood it better. And for good reason, it's estimated that 60%-70% of all property owners are overassessed. I.e. paying more than their fair share property taxes.
As property values continue to drop, more and more owners are overassessed. If you haven't looked at your real estate taxes lately you could be leaving thousands of dollars on the table. The process to appeal is easy and it doesn't actually take that much time.
Click here to see if your overassessed ie if you should bother to appeal.
Other Property Tax Resources:
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