By Phil Ganz
Edited by Ryan Skerritt
How to Calculate Property Tax / Fair Market Value
When you first get into the homebuying process, many things come as a surprise to you, and certainly something that you would have never considered until you started to look into financing for your home. Property tax often falls into this category.
Being a homeowner is a great thing, however, it does require you to dip into your bank account often. When it comes to property tax, most people get a bill and pay it, or it’s simply included into escrow on your monthly mortgage payments.
But how does one calculate tax? Property taxes are calculated by multiplying your city’s tax rate by the assessed value of your property and all the structures on it.
There are many other factors that go into the calculation of your taxes, many of which the average person does not consider.
Assessed Value / Taxable Value
One of the biggest factors that goes into calculating property tax is how much your property is worth. The typical homeowner has a general understanding of what the market value of their home is, and how much a buyer would pay for your home.
For taxes, however, a different number is used, which is the assessed value. Your home is typically assessed once per year and properties information can be adjusted when a property is bought, sold, built, or even renovated.
This is done by examining the permits and paperwork filed with the local municipalities. Often, a homes assessed value is very similar to its fair market value, but that’s not always the case in popular markets.
Your homes assessed value is about 80-90% of its market value, according to realtor.com. The taxable value of your home is the value of the property according to your assessment, minus any adjustments.
Mill Levy
A mill levy is likely something that isn’t talked about on a daily basis. A mill levy is a tax assessment rate in your area.
This tax rate does vary based on the public amenities offered and revenue required by the local government.
If your area has a public school, police force, fire department, high end school districts, and local parks and playgrounds, your property tax will be higher compared to an area without those amenities.
Although certain towns and cities do offer these amenities, just remember, at the end of the day, you are paying for these amenities. So, if you live near a beautiful park, I will highly recommend that you start using it the best of your ability!
The Bottom Line
Knowing how to calculate your property taxes is something that every homeowner should know, but there are also places where you can find your property taxes.
Most of the time, you can find the exact amount, or something very close to what you’ll pay in property taxes on the listings at realtor.com.
In other cases, you can enter a home’s location and price into a home affordability calculator, which not only estimates your yearly taxes but also how much you can anticipate paying for your mortgage, homeowners’ insurance, and other expenses.
With over 50 years of mortgage industry experience, we are here to help you achieve the American dream of owning a home. We strive to provide the best education before, during, and after you buy a home. Our advice is based on experience with Phil Ganz and Team closing over One billion dollars and helping countless families.
About Author - Phil Ganz
Phil Ganz has over 20+ years of experience in the residential financing space. With over a billion dollars of funded loans, Phil helps homebuyers configure the perfect mortgage plan. Whether it's your first home, a complex multiple-property purchase, or anything in between, Phil has the experience to help you achieve your goals.
About Editor - Ryan Skerritt
Ryan Skerritt has over 10+ years of experience in the residential financing space. With over two hundred and fifty million of funded loan volume, Ryan has the skill set to help any homebuyer configure the perfect mortgage plan.
