Estimating property tax is not as accurate as using a property tax calculator. However, if you need to know how to calculate property tax, we’ve got you covered! New homeowners need to know that money is the most important part of the purchasing process however, there are other steps that you need to consider as well. Besides your mortgage, there are additional costs that you will have to pay when buying a home including application, and inspection fees, appraisals, closing, or escrow fees including property tax can be included. If you are a first-time homebuyer, you may remember how property tax is calculated, and what it looks like on an official tax statement from other property purchases. New home buyers may be unaware of how to calculate property tax, or where to find out where to find information on tax assessment, information, or annual property tax values when they change. Talking to a professional real estate agent is the best way to understand the most current property tax laws, and get information on your local real estate market. While a property assessment can fluctuate depending on upgrades made to the home, your tax rate may also fluctuate depending on local government changes.  

Learn How to Calculate Property Tax

If you want to know how much property tax you will need to pay during the purchasing process, use a property tax calculator. Your local government will send you a tax bill every year with an amount that you owe for the year, however, it is best to know how the tax is calculated on your own. Here is a three-step guide for how to calculate property tax.

  1. Assess Home Value The most important factor affecting your property taxes is the home value. You may have an idea about how much the market value is of a property, but you could be wrong if you just estimate it without performing research. Find out more to get an understanding of your home’s market value by working with a real estate agent. The amount of money you hope the buyer will pay may be slightly different than the home’s assessed value. During the home selling processes, tax assessors will calculate a home’s assessed value based on basic features of the home including square footage, acreage, bed/bath configurations.Tax calculation image

The “market value,” may not be the same as the home’s assessed value. Typically, you can expect that a home’s assessed value will be about 80 to 90 percent of its market value. Check with a real estate professional to find out the exact figure from your local tax office, or municipality. 

  1. Taxable Value – Obtaining the taxable value of a property is an essential part of the property assessment. Remember to make adjustments based on exemption amounts to get an accurate taxable value of the property. If you need any help finding the value, talk to your real estate agent. 
  2. Mill Levy – There are a lot of numbers you need to know during the homebuying process. One of them includes what is known as a “mill levy.” This value is part of the tax assessment rate for properties in the area, including all types of real estate which can include a range of amenities. The neighborhood’s tax rate will vary based on public, and private amenities offered by the local government. A property tax levy is represented as a percentage on your local tax assessor or government website. You can use the value to calculate the amount of taxes you will pay. For example, 4% of a home that is worth $200,000 would cost about $8,000 in taxes per year. If you want to estimate your property taxes use this calculation: (home assessed value x levy). 

How Much Is Property Tax? 

In most cases, you will be able to get a ballpark estimate of the property taxes by using the simple calculation above. If you need an exact amount, you may need to talk to a professional real estate agent to help you gain the figure. It is important that you prioritize getting an accurate figure for your yearly taxes, your mortgage, home insurance, and other property expenses. In general, property taxes will need to be paid at closing however, some lenders will allow 60 days to make the payment.

Additional Tips for Calculating Property Tax

When you have decided on buying a home, you need to know that property taxes play an essential role in the process. In your decision-making, you will need to factor in the amount of money you can spend on property taxes and any losses. For some people, property taxes can be substantial, and thus push the purchase price of their dream home past the limits of their overall budget. Consider variables when you are deliberating over the property including county lines, and school districts. Property Tax Concept-House

You Can Also Use These Tips for Calculating Property Taxes: 

Get the Tools – Talk to a financial advisor about how property taxes work so that you know you are on the right path. If you want to achieve financial success, a financial advisor can give you the tools you need in any situation. Ask your real estate agent to refer you to financial advisors that you can work with.

Get Credit Find out from a professional agent what types of tax credits are available to you. Then, take advantage of all of the tax credits you can in order to reduce the amount you owe. Dollar-for-dollar using tax credits is one of the most effective ways to save hundreds or even thousands of dollars.  

Get It Right – You need to know that not all property taxes are created equal. In fact, there are so many different types of property taxes that you may need to get more information to understand the various types of taxes for land and structures. Make sure all of the amenities are included when you calculate property taxes including access to public services, sewer, water, and gas – so you get it right. 

How Can I Lower My Property Taxes?

You may want to negotiate the amount of money you spend on property taxes. Oftentimes, the reason your tax bills increase is due to local, state, and federal laws so it is best that you learn how to understand tax law. 

Besides that, you can learn to lower your property taxes by following these four steps: 

  1. Call the Tax Office – Contacting the local tax office is the first step in appealing the amount on your current tax bill. Find the phone number to the tax office online and call them directly to find out how to cut your property taxes. 
  2. Review the Assessment Look for discrepancies in your home’s assessment. In performing a careful review of the original assessment, you may be able to lower your property taxes.  
  3. Get an Appraisal Have your own independent appraisal performed in order to effectively negotiate property taxes. 
  4. Get the Facts – When you are ready to negotiate the property taxes for your home, only use factual information. Present your case, and use supporting evidence to secure a lower property tax rate. 

Talking to a real estate agent about how to calculate property tax can help you get an accurate figure for use in the home buying process. While you may feel confident in your ability to estimate the costs of your property taxes with a simple calculation, you may not be aware of the many variables that can affect the amount you will pay, and the number of tax losses you take. Call the offices of Jeff Barchi to get your property tax questions answered, today!