Property Tax

A property tax – is a tax taken on a property that an individual or company owns. In other words, it’s a regular payment drawn from the property owners by the government. The taxable property includes land, buildings, and sometimes even furniture, cars, and other movables. Basically, movables are the type of property that can be moved, while the location of immovable property like a house is almost impossible to change. The other name of the movables is a tangible personal property.

The tax payments are computed by the local government where the property is located. The property tax is a kind of ad-valorem tax that usually is considered as a regressive form of taxation. This form makes the taxes equal for everyone independently of their income or other conditions. So, the property tax is dependable on a tax rate defined in the area and current value of the property on the market that is also known as a fair market value.

Also, it’s important to mention that a deed of reconveyance, which represents the document established by the end of the mortgage, doesn't have any interaction with property taxes.

Property Tax assessment

The taxes are computed by a tax assessor – a person who estimates the value of your property and determines the amount of tax payments. In simple terms, the formula of the property tax assessment can be presented like:

Property tax = Tax rate x Property's fair market value

The tax rate can vary in different countries, states, or regions. The value of the property on the market can vary too. Especially, when you improve or change it somehow. For example, let’s imagine that you bought a property for $100,000. Then you’ve built a pool in the backyard, thereby improving your property and increasing its price on the market by $25,000. Consequently, your property tax will increase along with the market price of the property.

In order to control all these changes and keep the property tax updated it gets recalculated each year.

In case you don’t pay your property tax, the punishment will follow. The local government can put a lien against your property and transfer your rights on the property to the government. Therefore, be careful with your payments and study the tax laws applicable to your country.

Property Tax reduction

There are some ways of property tax reduction. This activity takes time and effort, but might be useful for someone who is ready to take the initiative. First of all, you can reduce your payments by avoiding the significant improvements of the property as in the example above. Also, you can study the tax information on the houses in your neighborhood. This information is free for access in the US and some other countries. You can compare the amount of property taxes on these houses to yours. If some kind of mistake or misunderstanding is found, you’ll get a chance to lower your tax payments. There are more options of reducing the taxes. You can consult with a tax professional on this matter.

Tax purpose

As any other taxes, the property tax payments are collected by the government for the purpose of public services improvement. This money finances municipal services, educational sphere, law enforcements, medical care, etc. Altogether these changes influence the life of each citizen. Paying taxes is a way of providing better life conditions for you and people around, thereby improving the quality of your life.

The property tax usually takes a minor part among other tax payments such as income tax or value-added tax. At least that’s a common practice amid the countries members of the Organization for Economic Co-operation and Development (OECD). The level of tax rate in the US is relatively high in comparison with other countries. 

Property Tax vs. Real estate tax

The property tax and real estate tax are quite similar. Sometimes these terms are even used as synonyms. However, they aren’t replaceable, because the property tax is a wider term and includes not only the taxes on real estate, but also on the types of movable property such as cars, furniture, jewelry, etc. So, every real estate tax is the property tax, but it doesn’t work vice versa.

Not all countries, states, or regions charge taxes on the movables, but a lot of them do, thereby you should better check your local laws concerning this question.