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Property Tax

Taxes form an important part of our financial planning. Along with paying taxes for the goods purchases and the services availed, we have to pay taxes on our houses and land. Property tax, also known as millage tax is a tax that the owner is required to pay on the value of the property being taxed. It is an ad valorem tax, which means to say that the tax implied is based on the value of real estate or personal property. The property tax rate is expressed in terms of percentage. It may also be expressed in terms of millage rate, which is the amount of tax per thousand currency units of property value. It is also known as permille. In order to calculate the property tax, the authority will multiply the assessed value of the property by the mill rate and then divide by 1,000. Forms of property tax used vary among countries and jurisdictions. Property tax is commonly confused with special assessment tax.

There are three types of property taxes: land, improvements to land and personal. Improvements to land are the immovable manmade objects like buildings and personal includes movable manmade objects. Realty, real estate and real property are all terms used to imply the combination of land and improvements. The tax department conducts an appraisal of the monetary value of the property and assesses the tax in proportion to that value. Property tax has a benefit that is not provided by income tax. In case of property tax, the revenue always equals the tax levy which can result in shortfalls producing budget deficits.

In the United States, the rights to collect taxes on property are vested on local government, at the municipal or county level. The tax assessor is a public official, may be a government or a private employee, who determines the value of real property for the purpose of apportioning the tax levy. He also determines the value of real property for any official purpose. The assessment is composed of two components: the improvement or building value, and the land or site value.

The responsibilities of the tax assessor includes maintenance of inventory information about improvements to real estate and creation and maintenance of tax maps which helps to ensure that no properties are omitted from the tax rolls and that no properties are taxed more than once. The assessment of an independent piece of real estate is done through standard accepted methods of evaluation such as income approach, market value or replacement cost. In case of ad valorem property taxes, assessment is based on fair market property values of individual estates.

Property taxes in some cases include personal taxes as well. Personal taxes includes automobiles, boats, aircraft and other vehicles, other valuable durable goods such as works of art, business inventory and intangible assets such as stocks and bonds. Personal taxes are commonly assessed by the states, although it can be assessed at any level of government. In the United States, property taxes are imposed by counties, municipalities, and school districts, where the millage rate is usually determined by county commissioners, city council members, and school board members, respectively.

One of the major concerns pertaining to property tax is urban sprawl. Urban sprawl is the spreading of a city and its suburbs over rural land at the margin of an urban area. As a city expands, relatively cheap and undeveloped lands such as farms increase in value as neighboring areas are developed into retail, industrial, or residential units. This has increased the rate at which agricultural lands are being sold. Several attempts are being made by the government to reduce the impact of property taxes on sprawl.

Tags: government, Income, market, revenue, tax

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