Calculate Property Tax

Property taxes are taxes that are usually assessed locally by municipalities to raise operating revenue for the city or town. In some cases, states can also levy property taxes. Property taxes are usually levied on any piece of privately-owned real estate, from empty lots to houses, based on the assessed value of the property. They can also be levied on possessions like cars, but often according to different rules. If you own these types of property, knowing how to calculate your property tax liability is an important skill for financial planning.

Steps

Calculating Property Tax for Real Estate

1. Find the assessed value of the property being taxed. When it comes to real estate, property taxes are almost always based on the value of the land. The more valuable the land, the higher the property taxes. Because the value of land can change over time, so can your property tax liability, even if your local government does not specifically change the tax rate. To start finding your property tax liability, you need to know how much the land you own is worth.
   • Property values are usually determined by a local or county assessor — someone whose job is specifically to do this. To find the value of your residence, you can contact your local assessor's office or else your local tax authority.
   • Note that many assessors have tools online that will allow you to look up your property's value based on your address. The assessor's office for Santa Clara Country in California has a great example of this sort of tool.
   • You can also sometimes get home value estimates from financial institutions. For example, Chase Bank offers a free online home value tool here.
2. Add the value of the land and improvements to get the total value. The value of a piece of land is usually determined by two things: the value of the land itself and the value of whatever is built on the land (i.e., its improvements.) To find the total value of your property, you'll need to add these two values together. Usually, the local assessor can provide both pieces of information.
   • For example purposes, let's find the property taxes for a house in ABC County, USA. The county assessor values the land at $357,000, mainly due to its close proximity to a vibrant, bustling downtown area and the convenience of two nearby freeways. The assessor values the house itself at $307,000. Adding these two values, the total value of our property is 357,000 + 307,000 = $664,000. In the next few steps, we'll use this value to find our property taxes.
3. Find the current local government's tax rate. Property tax is generally assessed as some percentage of the property's current value. This tax rate can (and does) vary over time depending on the needs of the taxing agency — for instance, if your county has a budget shortfall, it may raise the tax rate to make ends meet. Thus, up-to-date information is crucial.
   • Like your assessed property value, you can usually get this information from your local tax authority. For example, in Santa Clara County, California, tax rate summaries are available online for free.
   • Many municipalities apply the tax rate "per mill", or per $1,000 in assessed value. Don't let this confuse you — one mill is just 1/10 of one cent. For practical purposes, we can say that 10 mill of something is the same as 1%. E.g., a 20 mill levy on $100,000 would equal 2% of $100,000, or $2,000.
   • For the purposes of our example, let's say that ABC County has a 10 mill levy on our property. This amounts to 1% of our property's total value.
4. Find the property tax rates for other local agencies. The local government isn't the only organization that relies on property tax revenues. Other organizations that serve the local community often require their own share of property taxes. Notably, most public school districts get the majority of their revenue from local property taxes — about 77% in 2007, the most recent year that data is available. Cities, towns, and other local entities may also require property taxes.
   • In our example, let's say that the city of Appleton, where we live in ABC County, has its own 20 mill (2%) property tax and that the Appleton Unified School District levies its own property tax at a 30 mill rate (3%).
5. Add your tax rates up. When you know all of the different property taxes that you will have to pay, finding your total liability is fairly easy. Start by adding up the different tax rates to get one total property tax rate that you'll need to pay.
   • In our example, since we owe a 1% property tax to the county, 2% to the city, and 3% to the school district, we owe, in total, 1 + 2 + 3 = 6%
6. Multiply by your property value. Take your total property tax rate and multiply it by the value of the property you are dealing with. The answer you get is the amount of money you owe in property tax.
   • Don't forget that, to multiply a percentage, you must either first change the percentage back to its decimal form or else divide your answer by 100.
   • In our example, our total property tax rate is 6% and our property is worth $664,000. To find the amount we owe in taxes, we multiply 0.06 × $664,000 = $39,840.

Finding Personal Property Taxes for Possessions

1. Determine which possessions will be taxed. In addition to the "property tax" that most people are familiar with for homes and real estate, there can sometimes be other forms of property tax for other forms of property. These taxes on a person's possessions are called personal property taxes and are usually calculated differently than the home property taxes above.
   • The exact properties that will be subject to tax vary greatly from state to state and locality to locality. You can usually learn which forms of property can be taxed from your local tax authority. For example, in California, the Board of Equalization provides online documents covering this topic.
2. Find the tax or fee for each possession. Unlike home property taxes, many personal property taxes are not dependent on the value of the item being taxed (though some are.) A great example of this are taxes on cars in the form of registration renewal/tab fees: no matter whether you drive a brand-new luxury sedan or an ancient pickup truck with 200,000 miles on it, you must pay the same amount of money to renew your license plate tabs and keep driving legally.
   • Many tax authorities will have information available online that can help you find your personal property taxes. For instance, this site lists car tax calculators for the states that offer them (scroll down to see the list.)
   • For example, let's say that we want to buy a car in ABC County USA. Based on the state and local tax codes, we determine that we need to pay two expenses: a single one-time registration tax based on the value of the car and a recurring yearly fee to get our license tabs. If the car is worth $20,000 the registration tax rate is 1.5%, and the license tabs fee is $50, we'll owe 20,000 × 0.015 + 50 = 300 + 50 = $350.
3. Don't forget intangible possessions. Personal property taxes aren't just applied to real, tangible property — they can also extend to things like stocks, bonds, mutual fund shares, and so on. While some forms of personal property tax (like the vehicle registration fee example above) are quite common, taxes on intangible property can vary greatly from state to state, so check your local tax authority for more information.
   • Sometimes, beneath a certain value, intangible property will be tax free. For instance, before 2007 in Florida, the first $250,000 of property (including most intangibles) was not subject to tax.
   • In our example, let's say that, in addition to our car, we also have $300,000 of trusts that are eligible to be taxed. If the first $200,000 is tax-free in our state and, after that, the tax is 50 cents per $100 (0.5%) we'll need to pay 100,000 × 0.005 = $500.
4. Total your fees and taxes. Once you know all of your personal property tax liabilities, just add them up to determine the total amount of money that you owe. As mentioned above, these sorts of taxes can vary greatly from place to places, so what you pay may not be similar to what someone living somewhere else pays.
   • In our example, if we don't have any other personal property tax liabilities besides our car and our trusts, we'll simply need to pay 350 + 500 = $850.

Tips

• Note that many jurisdictions offer property tax exemptions for certain types of people and organization based on need and occupation. For instance, in California, low-income housing is eligible for certain property tax exemptions.
• If you file an itemized deduction for your federal tax return, you can often deduct state and local personal property taxes you paid.
• In most jurisdictions, property that is used as part of a business (including equipment, vehicles, office furniture, and so on) is subject to tax, while personal effects are usually not.

Related Articles

• Calculate Taxes on Operating Income
• Determine when Estate Tax Is Due
• Calculate California State Income Taxes

Sources and Citations

See also

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• Turn Someone in to the IRS
• Fill Out a US 1040EZ Tax Return
• Annualize
• Find a Federal Tax ID Number
• Fill Out a W‐4
• Account for Fixed Assets
• Calculate Tax on Bonus Payments
• Pay Less in Taxes
• Complete a W‐9 Tax Form

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