Whether you are a current homeowner or desire to be one in the future, developing an understanding of a property tax assessment will prove to be valuable for you. Each year, homeowners are expected to pay a large sum of money to the government, known as property taxes.
Some of you will find that your taxes are relatively low, while others of you will find that you are paying more than you had hoped for. Some of you will find that your taxes seem to rise, while still others seem to remain consistent.
In purchasing a new home, many homeowners have been caught off guard financially as they receive their property tax bill in the mail. The following is a quick explanation of the process behind the bill.
• What is a property tax assessment?
A property tax assessment is when your property is assessed based on its fair market value. After this assessment occurs, your property’s taxes are then determined.
Contacting the local agency that is responsible for issuing your property taxes will help you to know the equation that they use to determine the property taxes in your area.
But the question arises, “How is my property’s value assessed?” The following are three different types of assessing techniques that are commonly used:
1. The replacement method – The replacement method is a method of assessing that involves determining the cost involved in replacing the home, building, etc.
As this form of assessment is taking place, the depreciation of the home is also considered. The value of the property/land itself is also taken into consideration.
This form of assessment is most common for new homes or unique homes/structures.
2. Sales comparison method – The sales comparison method is the method most commonly used for residential real estate.
This method consists of taking into account the value of homes in your area to determine a proper assessment of your home.
3. Income method – The income method is often used for business-related properties (i.e., office buildings, apartments, etc.).
In this approach, the assessed value is determined based on the amount of income the property is able to generate while also taking into consideration expenses such as insurance, costs of operation, etc.
I’m sure some of you are wondering by now, “When will my property be assessed?” An accurate answer to this question will be different depending on the region in which you live and the type of assessment being done.
A number of you may be living in an area in which your assessed value will be determined based on the purchase price of your home. This may be the only assessment that will ever be given to your home while you live there.
Another group of you may be living in an area in which assessments are done every year. In an environment such as this, you can expect gradual differences from year to year on your taxes.
Finally, there are still others who will find that assessments will be made at greater intervals than a year. For those of you who find yourselves living in these areas, your taxes will remain relatively consistent, but you will encounter some relatively minor changes over time.
• Why is a property tax assessment important?
A property tax assessment is important for a number of reasons. While nearly everyone dislikes paying bills, especially taxes, to the government, the money itself is used to make your city function properly.
Your local police agencies, fire departments, parks, and recreational facilities, schools, government employees, and transportation are all funded through the source of property taxes.