sno-king living Real Estate | June 2021
what do rising sales prices mean for property taxes? All across the country housing prices are surging as buyer demand increases and available inventory of homes drops. Homeowners are relishing the increased equity month over month. Buyers are eager to get on and climb the property ladder and watch their real estate investment grow. However, rising home values may be accompanied by rising property taxes. How Are Property Taxes Determined? Property taxes are assessed by the local municipality’s tax assessor’s office. This is a tax that is calculated by looking at the property’s current assessed value – which is usually different from market value (more on this below). Property taxes are a major source of income for local government and help to fund schools, roads, emergency services, parks, libraries, and recreation. Once the property’s assessed value is determined, the assessor’s office will multiply the property’s value by a mill or levy rate (the property tax amount per $1,000 of the assessed value of the property) that is set by local tax jurisdictions. How Often Are Tax Assessments Completed? Taxes can adjust on an annual basis depending on new bonds passed, changing mill or levy
rates, and more, but new property assessments can occur on an annual basis or, every five years, somewhere in-between, or even when the property is transferred. In our area, assessed value is determined through annual re-evaluations based on market data, and physical inspections that take place at least once every six years.
improvements, and more. Valuation practices vary by area. The assessor will also look at what similar properties have sold for and what it would cost to replace the dwelling. Although comparable sold properties are reviewed, assessed value has less to do with current market supply and demand which changes all the time.
How Will Rising Values Affect Property Taxes?
So, although market values are steadily increasing, tax assessed values may take some time to catch up. Many municipalities have laws in place to assure that taxes won’t rise more than a designated percentage to keep property taxes affordable. For instance, if the average market value has increased by 10%, property tax may only be increased by 3% to protect home Continued
There is a key difference between assessed value and market value of a property. Both values are affected by different factors. Market value depends on the current market conditions, the number of homes available and the number of buyers looking for homes – basically supply and demand. Assessed value is determined by looking at the land, its zoning, square footage, improvements, and taking a look at any buildings, their condition, their age, the square footage,
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