The real importance of property taxes lies in the cities, counties and states. All because these financial charges are the main source of income for government institutions to function. The money that gets collected will be destined to different services such as parks, museums, avenues, street lights, firefighters, policemen, education and so much more.
That information is pivotal to understand the complexity behind the whole topic of property taxes. Now, we are going to dig deeper into the definitive math that goes inside, keep in mind that a blog article is not enough to encompass all the aspects, that’s why we will share some useful links at the end of this piece for you to expand; let’s get going.
Something Called “The Mill Levy”
In the beginning, there was no standard measure to impose a clear and understandable tax rate on properties in all +3000 US counties, that is why the federal government came up with the idea of having a unique fiscal tool in order to find a solution to this important issue.
They created the mill levy or millage tax, where one single mill represents 1/10 of one cent, sounds confusing right? Wait for it. In a real-world scenario, this mathematical operation goes this way: For every $1000 of property value, one mill will be worth $1, for every $10.000 it will be $100, and for every $100.000 the result is $1000. The trick is in the 1/10 procedure.
Every tax jurisdiction has the power to tax properties, what they do is to gather all the levies to evaluate the total mill rate in the region in question. This peculiar tax defines what you are about to pay each year, but since we are talking about taxes, let me tell you that there is a lot more.
The Valuation Process
We are entering in a complex territory, but don’t worry, we have managed to synthesize the information for you to understand. It all comes down to three points that are crucial to uncover the whole mystery. Pay attention, these factors will be recognized in the whole appraisal framework.
- What you will earn from the property if it were rented will be highly considered by the valuation expert, also he/she will be studying the insurance costs, how manageable is the property at the moment, and what are the repairs that need to be done.
- Simply put, the expert will monitor the area to see how other properties perform, in order to come up with a realistic valuation of the house.
- Once all previous calculations are done, the assessor estimates the amount of depreciation, the cost of building materials, labor and how much the home would cost if it were empty.
That was kind of hard to shorten, but there it is. If you know someone who needs to know any of those points, do not hesitate to share the knowledge with them, and as we promised, here are some links to outstanding articles that will guide you even more in regards to property taxes and how to handle them.
- 2019’s Property Taxes by State – WalletHub.
- The 10 Best and 10 Worst States for Property Taxes – The Balance.
- Mill Levy – Investopedia.
- Property taxes in the US: A state-by-state look at what you’ll pay.