Quick Guide to Property Taxes

Every homeowner pays property tax, but some might need clarification on where that tax money goes, how it is calculated, and various other related questions. My goal today is to clarify every aspect of property tax and answer any questions my readers might have. As a homeowner, you know that property taxes make up a significant portion of your bills, and as a buyer, if you are not aware of property tax or what that expense will be once you own a home, it can hurt you significantly.

Firstly, property taxes vary based on the location of your home and are used in various ways throughout your community. Property taxes can be used for several things, including but not limited to schools, police, fire, garbage collection, and road maintenance. Property tax is calculated based on your home value and the tax rates for that county or city, which could change throughout your home ownership.

How are real estate taxes calculated? The first step for the local government is to find your property’s assessed value through an appraisal. Depending on the county, these can be done annually or, in some places, every other three years or more. Next, the county would apply any exemptions you might have to make it easier for homeowners to afford their property taxes. These exemptions could include homestead, senior citizens, religious, and disability exemptions. Lastly, the county would derive your annual property tax amount using their millage rate. “A mil rate is a tax you pay per 1,000 of your home’s value. For every $0.001 mill rate, you’ll pay $1 for every $1,000 in home value” (Rocket Mortgage). Let's do an example for Jupiter, Florida. The median single-family home sale price here last month was $1,175,000. Using that price and Jupiter’s mill rate of 17.9465, you would do the following:

·      17.9465/1000= $.0179465

·      $1,175,000 x $.0179465= $21,087.14

The homeowner will owe $21,087.14 yearly property taxes if the mill rate remains unchanged.

As you can see, this can be a hefty bill that homeowners need to pay each year. The good news is that, in most cases, this can be deducted from your federal income taxes; however, keep in mind that there is a $10,000 cap.

I hope this newsletter on property taxes answered all the questions and concerns that you might have. If there are any further questions, do not hesitate to reach out, as I would love to help!