Everything You Should Know About Property Taxes

Everything You Should Know About Property Taxes

Over the last few years, homeowners have hit the jackpot in terms of home values. We’re talking double-digit gains in most cases.

However, there may be a little devil hiding the details. Yes, we’re talking about property taxes.

According to ATTOM, a leading curator of real estate data nationwide for land and property data, $328 billion in property taxes were levied on single-family homes in 2021, up just 1.6 percent from $323 billion in 2020. Well down from the 5.4 percent increase seen from 2019 to 2020 and marked the second smallest rise over the past five years.

Meanwhile, the average tax on single-family homes in the U.S. in 2021 increased at the smallest pace in those five years, rising 1.8 percent from $3,719 in 2020 to $3,785 last year. The latest figures resulted in an effective tax rate of 0.9 percent, down from 1.1 percent in 2020.

That said, it’s not unreasonable to believe homeowners will see property taxes rise in the coming years.


How are Property Taxes Calculated?

Property tax is determined by multiplying the assessed value of your property by the basic levy or mill rate, which is a percentage set by the municipal tax authority. In some cases, special assessments are also included in the total property taxes assessed.

The mill rate is the total tax rate levied on your property value, with one mill representing one-tenth of one cent. So, for $1,000 of assessed property value, one mill would be equal to $1.

Who Decides My Property Value?

A municipal property assessor is responsible for deciding the assessed value for every home within a given tax district. Some assessors work for a county or village, but most are employed by a town or city.

An assessor looks at information about your property and neighborhood, while comparing it to other properties in your area, to determine the value. The assessor uses the market approach, which is a method to estimate the value based on the selling price of similar homes. This approach is used to find the market value of the property and determine the assessment rate. The market value and assessment rate are then multiplied to get the assessed value.

You can and should contact your local taxing authority for further details in your area.

Property Tax Assessments Can Be Appealed

If you believe your property tax assessment is inaccurate, you can challenge it, but a time limit typically applies.

When you contest an assessment, you’ll need to have the facts and information that support your claim of a lower property value. A properly documented appeal is clearly much more likely to be successful. Do not expect the municipality to joyfully agree with you and slash your assessment.

Of course, there’s a level of emotion involved. It may be a better idea to hire a professional appraiser. They can provide the strongest evidence of your property’s worth. If your community allows outside appraisals—and if you’re willing to spend at least $250—find an appraiser with national certification.

Can I Deduct Property Taxes from My Income Taxes?

Good question. At one time the State and Local Tax deductions (SALT) were quite generous for higher tax states such as Massachusetts, Connecticut, and California.

That changed in 2018, with the passing of the Tax Cuts and Jobs Act. The new law placed a cap of $10,000 per year (or $5,000 for those married and filing separately) on federal deductions for state and local taxes (SALT). This figure includes all real estate, income, and sales taxes on the property.

This really affects counties with an average single-family-home tax of more than $10,000. This includes 12 in the New York City metro area alone. The top five are Kings County (Brooklyn), NY ($13,734); Marin County, CA (outside San Francisco) ($13,719); Westchester County, NY ($13,674); Essex County, NJ ($13,116) and Nassau County, NY ($13,095).

Two Ways to Pay Your Property Taxes

Option one: once the tax bill arrives (annually or every 6 months) you go online and make a payment or pay via check.

Option two: you can set up an escrow account with your mortgage lender. This is included in your monthly mortgage payment and your lender sets aside the money you pay for property taxes.

For most people, this is an easier option because they won’t get hit with a hefty bill all at once or get caught short on funds. Part goes toward your mortgage to pay your principal and interest.

The other part goes into your escrow account for property taxes. It can even include insurance premiums (like homeowners insurance, mortgage insurance, or flood insurance).

Embrace Home Loans® is here to help you sort all these things out. And if you are thinking of refinancing or buying a new home let one of our local experts help you find the perfect loan terms that fit your lifestyle.                                             

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By John Chiappetta / December 2nd, 2022 / Categories: / Tags:

John Chiappetta

John is a freelance copywriter with extensive experience in retail banking, lending, and fintech.