Property Tax

The ins and outs of personal property tax law

If you own a house, condominium, or commercial or residential investment property, you have to pay property tax to your municipality (and, in some cases, to the state as well). In theory, city property tax covers vital necessities such as trash collection and road maintenance while providing the city or state with vital income for the provision of important social services.

Property tax rates vary significantly from city to city and state to state. You should request specific information from your municipal authorities if you have questions about rates, but before you do, there are some general facts you should know about personal property tax.

How Property Tax Works

In the United States, this tax is calculated as a percentage of the total value of your home or investment property. Rates range between 0.2 and about 4 percent of the property's value, depending on the jurisdiction. As you can see, this represents a fairly significant range that can make a great deal of difference in the amount of money you pay. Generally speaking, property taxes are higher in major cities and desirable or exclusive residential areas.

To determine the value of your home, your municipality may perform what's known as a tax assessment. This process sets a taxation value for your home by comparing it to similar properties in the same neighborhood, thus setting your tax rate as a percentage of the assessed value.

In some cases, you may be required to pay state property taxes in addition to city property taxes. However, for the most part, residential and commercial property tax is the domain of municipal governments. Also, be aware that you may also be responsible for personal property taxes, which are defined as "moveable assets" and are also known as "chattel." This includes items like furniture, jewelry, art and any other assets of significant value that are not considered "fixed," but are rather "moveable."

Pay Property Taxes

You will have to pay the appropriate amount, based on the assessment value, to your local government. Typically, you pay property tax annually.

It isn't easy to get property tax relief, unfortunately. In most cases, the only way you can avoid property taxes is to reduce them, which means you have to call into question the city's value assessment of your home and have it privately appraised. Your municipal government will have a board of review, which serves as an ombudsman between the city's tax collectors and property taxpayers.