How the Tax Value of Property is Calculated
Whether you’re a homeowner or a potential homebuyer, the process of calculating the tax value of a property may seem obscure. Real estate taxes can feel additionally confusing when you see your home’s assessed value on a tax bill, and it doesn’t match your home’s current market value.
However, in most states, this process is based on a common equation.
In this post, we explain the essentials of how property taxes are calculated, who levies them, and how they can affect your real estate goals. We’ll also give you a list of the states with the highest and lowest property taxes.
Editor’s note: The information in this post is meant to be used as a helpful guide for educational purposes. HomeLight always encourages you to reach out to your own tax advisor.
Who charges property taxes and why?
Property taxes are typically administered at the local government level, with each state imposing specific limits on how local jurisdictions may tax property and what those tax revenues can be used for. Your property can be subject to taxes by multiple jurisdictions, such as cities, counties, and school districts.
Cities: Municipal governments levy property taxes to fund local services like police and fire departments, road maintenance, public parks, and libraries. These taxes are essential for maintaining the quality of life and infrastructure within the city limits.
Counties: County governments also impose property taxes to support county-wide services such as county roads, public health departments, and sheriff’s departments. These taxes are necessary for the broader regional services that benefit multiple cities and unincorporated areas within the county.
School districts: Property taxes are a primary funding source for local school districts. These taxes ensure that schools have the resources needed for educational programs, facilities maintenance, and teacher salaries. Quality education systems are vital for community development and property value stability.
