Property tax is one of the most common taxes around the world. It is also known as land or land holding tax, an annual levy placed on the value of land and buildings by the authority that collects them. As the owner of the property, you have to pay this tax. US Property taxes are usually used to finance local government services provided for people who live in their jurisdiction (where they live).
In the US, property taxes are used by local governments to finance a range of services. These include general local government functions such as police and fire departments, libraries, public schools, parks, roads, and other infrastructure.
The property tax has been around the USA since 1797. One of the reasons why this tax is so common worldwide is that it’s relatively simple to administer.
Land cannot be hidden, destroyed, or transported, making valuing land possible. Also, unlike most other taxes, collecting one-seventh of the value every year provides an assured income with little chance of a shortfall.
In this article, we will be going over what property taxes are, how much they cost people in the US, and options for avoiding them.
What is US property tax, and how does it work?
US Property tax is a tax that individuals pay each year on the value of real estate they own. In the US, this type of taxation is common in most jurisdictions. It offers a stable source of revenue for the government.
These property taxes are collected by local authorities who can set rates according to their budget needs. The amount charged depends on which state or local government is involved. Because rates vary widely, it’s essential to check the rate in your area before purchasing a home to make sure you can afford any property taxes.
How do property taxes work?
Understanding how US property tax works is pretty straightforward. The amount you pay is based on the assessed value of your land and any buildings, structures, or other real estate improvements that are located on the land. The assessment process varies from state to state because each jurisdiction creates its own assessment rules and regulations.
In general, the local assessor’s office assigns an estimated market value to a home based on comparable sales in your neighborhood. The assessed value will be lower than the purchase price. That’s because assessments are done as of a specific date; usually January 1st each year, and a yearly increase can’t go back more than three years.
Tax rates also vary widely depending on where you live. The US property tax rate for an area tends to stay the same from year to year because it’s set by a local government such as a county or city.
How much does US property Tax cost?
US Property tax is calculated based on your county, city, town, or parish’s tax rate. This is the percentage of the final taxable value you will pay to the taxing authority (county).
In the US, it highly depends on what state you live in. Some states, such as Alabama have relatively low property tax rates of around 0.37%. In comparison, other states have high rates of over 2%, like New Jersey.
It can be hard to determine precisely how much a property tax will cost you in the US. Your yearly bill is determined by multiplying your property’s assessed value by the tax rate set by the government agency assessing it.
It also depends on the entities that are assessing the properties. For instance, there are separate entities for cities or towns that impose their property taxes on top of your regular assessment in some regions.
Related Tool From Another Source: Property Tax Calculator from SmartAsset. Use the calculator to know the current US property tax rate in your state.
U.S. property Tax by State 2022:
The US property tax rates might depend on the year you are in because they sometimes go up and down. This list is in order from the lowest to the highest. You can get an idea of what you will have to pay. According to the data below, New Jersey is the worst states for property taxes in the US.
| US States [A – D] | Property Tax Rate |
|---|---|
| Alabama | 0.37% |
| Alaska | 0.98% |
| Arizona | 0.60% |
| Arkansas | 0.61% |
| California | 0.70% |
| Colorado | 0.52% |
| Connecticut | 1.73% |
| Delaware | 0.59% |
| District of Columbia | 0.58% |
| US States [F – K] | Property Tax Rate |
|---|---|
| Florida | 0.86% |
| Georgia | 0.87% |
| Hawaii | 0.31% |
| Idaho | 0.65% |
| Illinois | 1.97% |
| Indiana | 0.81% |
| Iowa | 1.43% |
| Kansas | 1.28% |
| Kentucky | 0.78% |
| US States [L – M] | Property Tax Rate |
|---|---|
| Louisiana | 0.51% |
| Maine | 1.20% |
| Maryland | 1.01% |
| Massachusetts | 1.08% |
| Michigan | 1.31% |
| Minnesota | 1.05% |
| Mississippi | 0.63% |
| Missouri | 0.96% |
| Montana | 0.74% |
| US States [N] | Property Tax Rate |
|---|---|
| Nebraska | 1.54% |
| Nevada | 0.56% |
| New Hampshire | 1.89% |
| New Jersey | 2.13% |
| New Mexico | 0.59% |
| New York | 1.30% |
| North Carolina | 0.78% |
| North Dakota | 0.88% |
| US States [O – T] | Property Tax Rate |
|---|---|
| Ohio | 1.52% |
| Oklahoma | 0.83% |
| Oregon | 0.91% |
| Pennsylvania | 1.43% |
| Rhode Island | 1.37% |
| South Carolina | 0.53% |
| South Dakota | 1.14% |
| Tennessee | 0.63% |
| Texas | 1.60% |
| US States [U – W] | Property Tax Rate |
|---|---|
| Utah | 0.56% |
| Vermont | 1.76% |
| Virginia | 0.84% |
| Washington | 0.84% |
| West Virginia | 0.53% |
| Wisconsin | 1.53% |
| Wyoming | 0.51% |
Can you avoid property taxes in the US, and how?
US Property taxes are typically a fixed bill that you can’t avoid, except in rare cases like foreclosure. That said, you can do things to minimize what you end up paying in the long run. Here are six things you should consider.
1. Limit your home improvement projects:
Property taxes are based on the value of your land and anything that’s built or added to it. Any renovations, such as a new roof, windows, doors, or landscaping, can increase your property tax bill by increasing its market value. So if you want to reduce your property tax, make sure only to do necessary repairs and renovations.
2. Talk to your neighbors before making the purchase:
Before you buy a home, do some research on the property tax rate for your area. That way, you can be prepared to pay estimated yearly property taxes before you sign a purchase contract. Also, ask your real estate agent if they know what the property tax rates are or who assesses those taxes, as they vary from location to location.
3. Be with the property assessor during the inspection:
The property assessor is responsible for assessing the value of your home and determining what percentage of its final assessed value goes toward property taxes. So when they come to your house for inspection, don’t leave them alone. Guide them through the property. This way, you can tell them about the current condition, the repairs you have completed, and any other special features your home has.
4. Filing a tax appeal can reduce your tax burden:
The tax appeals board can reduce your property taxes if they feel that the assessed value is too high. This, of course, takes time and effort. Still, it’s often worth it if you believe there are extenuating circumstances (such as a recent significant drop in the value of your home).
5. Look for exemptions:
State and local governments usually offer exemptions to people who meet specific requirements. For example, if you’re 65 or older, disabled, unemployed/underemployed (Read More About The federal unemployment tax act), or if your property is used as a primary residence only.
6. Go for a second opinion if you feel the taxes are too high:
If you think that your property taxes are incorrectly calculated, talk to local officials about it. They’ll often bring in an outside assessor and tax official to give a second opinion and see if you can reduce your property taxes. If you were right then, this could save you a lot of money.
Bottom line
In conclusion, US property tax is just another expense. All you can do is try to be prepared, and if possible, take measures to reduce your tax burden. If not, then simply budget for it accordingly.
Also, you should know that the rates mentioned above don’t include special assessments or fees levied by state and local governments. These charges are based on the average of all taxes imposed by the local government for properties within a particular community.
You might also be interested in >> How income tax works and ways to legally pay less.
