What Is a Property Tax Assessment?

At the end of every year, Homeowner’s typically receive a bill to pay property taxes. While they aren’t the most exciting bill to pay, it’s worth mentioning that they do go toward good causes, including funding essential public works and services.

Determining how big your property tax bill will boil down to your property tax assessment. As a Homeowner, it’s helpful to know how property tax assessments work, including what is considered in them.

We’ll cover all the property tax assessment basics in this article, including the details of paying them now and in the future. Keep reading for more information.

How Do Property Tax Assessments Work?

Depending on your county and state, property tax requirements can vary. Typically, they will be paid on an annual basis. Assessors will value the property once every five years.

When it comes to evaluating the value of your home, multiple factors go into the assessment. Neighboring homes sales and prices are determined, and the local government budget is considered when deciding on property taxes.

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Property Taxes vs Tax Assessment

The value of a piece of real estate is determined by a tax assessment. Essentially, an assessor from your local government will determine the value of your home as well as the amount of tax due on it. It doesn’t matter what type of home you own; property taxes are inevitable.

What is Considered in a Tax Assessment?

As mentioned, multiple factors are considered in a tax assessment. Some of the most common property tax assessment considerations include:

  • The property's size
  • The construction type
  • The age of the property
  • The location of the property

The local government will ultimately decide how the property is assessed for tax purposes but will typically rely on one of three methods to do so.

The Cost Method

Also known as the replacement method, this property tax assessment provides a general estimate of how much it would cost to replace your property. In doing so, the assessor will consider current rates for materials and labor. The land value is added, and reasonable depreciation is deducted to reach the final total.

The Sales Comparison Method

The sales comparison method, also known as the market approach, values similar properties in the area. The unique attributes of your property, in particular, will adjust the estimate up or down.

The Income Method

The income method is typically used for assessing business property and looks at how much income the property makes. Adjustments are then made, including:

  • Maintenance expenses
  • Operating expenses
  • Insurance Costs
  • Business taxes

Paying Property Taxes

Paying your property taxes is a burden that doesn’t end when you pay off your mortgage. Once your home is paid off, you will receive a separate bill for your property taxes, even if you paid it together with your mortgage during its term.

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Some local governments will allow owners to claim exemptions, helping them reduce their property tax assessments. Here are a few examples:

  • Homestead Exemption: for Homeowners who reside in the home.
  • Senior Exemption: for Homeowners who are retired.
  • Veteran Exemption: for Homeowners who are veterans.

Federal Tax Deduction / Standard Deduction

The one upside to paying your property taxes is that you can claim a federal tax deduction if you are willing to itemize your deductions. This deduction benefits Homeowners with all itemized deductions exceeding the standard deduction amount within their filing status.

As a Homeowner, you might decide whether to claim a federal tax deduction or a standard deduction for your property taxes.

How to Challenge Property Tax Assessment

If you disagree with your property tax assessment, as a Homeowner, you always have the right to appeal it or request a formal reassessment. To start the process, you must reach out to your local tax authority for more information on how to begin formulating your property tax assessment appeal letter.

Wrap Up

There is a lot of paperwork involved when it comes to being a Homeowner, but that doesn’t mean it must be confusing. Property taxes are inevitable as a Homeowner, so you must understand how they work, how they are determined and your options for paying them.

If you have more questions about the property tax assessment process, the experts at David Weekley Homes are always here to help! Never hesitate to reach out to us with any questions about any part of the home buying experience.