Property Taxes:
Understanding How Property Taxes Work
Property tax assessments can be unsettling for anyone who owns real estate. you mind your own business, pay your bills and the government sends you a notice that your property's value has increased and you will be taxed based on that amount. A lot of people think that this will increase their property taxes, and so they decide to fight the assessment. STOP!!! Do not fight your assessment before you know what the assessment is based on and how it will effect you.
Higher Property Assessments Do Not Mean Higher Taxes
It is true that often when we receive an increase in our tax assessment that our taxes increase. However, that is not always because of the assessment.
To understand why this is we need to look at how property taxes are set.
Step 1. Property assessments: All properties with in a municipality are assessed a value based on size and location of the property and the upgrades on the property (4 bedroom home with 3 bathrooms ...).
step 2. Find the Total Value of Municipality: All of the assessed values for all of the properties in the municipality are added together. This gives a total value for the entire municipality.
step 3. Create a Budget: The Municipality sets a budget for the year, based on known recurring expenses, planned expenses for upgraded and new facilities, inflation on current services and any expense that the councillors expect to have to pay along with any safety margins that are felt to be required for unexpected expenses.
step 4. Divide the Budget: The total budget is then divided by the total value of the municipality to find at taxation rate. this is a percentage that you will be charged per every dollar of value for your property.
Step 5. Calculate individual Property Taxes: Your assessed value is now multiplied by the tax rate to calculate your percentage of the over all Municipal Budget.
Therefore, the factors that effect your property taxes are:
Your properties assessed value relative to the total value of the Municipality. If your home increases in value by more that the average home in your area then your taxes will go up.
The Municipal Budget. If the budget for running your municipality increases so will your taxes.
Since it is very rare for a municipal budget to decrease, this is the usual cause for increased property taxes. Your property assessment can increase or decrease your property taxes depending on how your home is assessed in comparison to other similar homes.
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