"It's time to be patriotic ... time to jump in, time to be part of the deal, time to help get America out of the rut."  – Presidential candidate Joe Biden

Back in 2008, what Vice-Presidential nominee Joe Biden was referring to was federal income taxes, which are substantially different in the way that their assessed and collected than the taxes on your property. What is similar is that both types of taxes represent money that you have to pay to the government, and while some may feel that both are patriotic, few enjoy shelling out money. Your property taxes pay for very different things than your federal income taxes do, and it’s worth exploring those. But before we get to that, let’s look at how property taxes are collected. 

Calculating Property Taxes

Depending on where you are in the country, your property taxes will be assessed and collected by the county or city that you live in. Two factors affect the property taxes that you pay:

• The Millage Rate – This is a percentage established by the county and applied to homes. If the millage rate is 1%, you would have to pay $10 for every $1000 of your home’s assessed value.
• The Assessed Value – This is an approximate value of your home. It is largely based on the market value of homes that are similar to yours in size, lot size, and geographic proximity. 

A simple example of how property tax would be calculated would be a house worth $300,000 in a city where the millage rate is .001 or .1%. The annual tax would be $3,000. Certain exemptions may be applied. These are usually dollar reductions subtracted from the assessed value of your property.

How are my property taxes paid and where do they go?

If you have a mortgage on your house, the chances are good that your bank collects a portion of your taxes in your payment and pays them out to the city or county when they’re billed. Once the municipality has an accurate picture of how much tax revenue they’re likely to collect, they can determine their budget. Many items are already determined by ongoing expenditures. For instance:

• Police
• Fire• Schools
• Public works
• Park and public area maintenance
• Overhead on government property
• Administrative costs
• Interest on loans (usually in the form of bonds)
• Public events
• Anticipated overtime

In addition to these, a portion of property tax revenues is paid to other government entities. For instance, cities have to share a portion of their tax revenues to fund things like county schools, a county jail, courthouses, water plants, et cetera. In other words, even if you pay your taxes to your city, they’re paying a portion to the county. If you pay your taxes to the county, on the other hand, they distribute funds to the city.

Consequences for Non-Payment of Taxes

If you have a mortgage on your property, the non-payment of taxes is usually not even possible unless you stop paying your mortgage. Taxes are part of your escrow account. If, however, you own your property outright and choose to ignore your tax bill, they will place a lien on your property. If you try to sell your property, the county will be paid first. Eventually, they may decide to foreclose on your property, which can cost you much more than the original tax bill. If, however, you do feel you’re being unfairly taxed, contact a real estate tax assessment lawyer today.