How are property taxes calculated?

By: Contributors

The revenue from property taxes is used by local governments to pay for public services, including fire departments, law enforcement, roadwork and schools. Property taxes are collected on any non-governmental real estate properties, including houses and places of business. However, religious organizations are usually exempt from property taxes. Tax assessors are either elected or appointed; they're responsible for determining how much a specific property is worth. They even assess tax-exempt properties and vacant lots.

Property is divided into assessment units or assessment areas; the lines of these areas can be drawn to include an entire city, school district or county. Tax assessors determine the market value of every property in their assessment areas within the framework of their property tax assessments; property tax rates are based on these assessments. Normally, the tax assessor doesn't physically go property to property to figure out market values; instead, tax assessors compare the market values of similar properties based on property sale prices.


While each local government in the U.S. has its own real estate property tax procedure, they usually set and adjust tax rates based on the income they need to meet their budgets. Some of the money comes from sales tax and state aid; the rest comes from property tax. The difference between the budget and the amount of expected revenue is called the tax levy. Since local governments have drastically different needs across the country, property tax rates can also vary greatly. Some governments are more concerned with filling a bunch of potholes, while others have to enlarge their police force in order to fight gang crimes. Still, property taxes don't usually fluctuate very much once they're set. However, the assessment rate is likely to change more often.