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Property Taxes - an Explanation

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By : Sonia Smith    99 or more times read
Property taxes are levies issued by the government on a person’s personal and real property. The home is assessed to be able to get its value and that value is taxed. The taxable amount is determined by multiplying the fair market value of the property with the present tax rate.

Property taxes are sometimes referred to as realty taxes since it is usually levied against real estate. There are various types of property taxes, like the personal property taxes and assessed and usually charged separately from a real property tax, which includes personal possessions such as cars, motorcycles, boats and campers.

Local governments like cities and counties receive their revenues from property taxes. Usually, these taxes are used for government administration and expenses for first responders like law enforcers, paramedics and fire fighters. Furthermore, the revenues are also used in funding local courts and helps to pay services like parks, community programs, civic centers, libraries and schools. Usually, school districts receive a large part of the income derived from property taxes.

Below are some advantages of property taxes:

  1. Property taxes are administrative and make it technically possible to maintain and introduce in almost all cases.

  2. It is cheaper to administer and there is a great chance to aim for a cost yield of two percent or less.

  3. Property taxes are hard to avoid or evade and the success of the collection rates are about ninety-five percent and can be achieved easily.

  4. A property tax is transparent.

  5. People comprehend the concept of the market value and thus appreciate the assessment basis.

  6. There is good correlation between the capacity to pay and the value of the property assessed.

  7. Property taxes could be marginally progressive so long as it is correctly designed.

  8. The revenues are buoyant and predictable.

  9. It is well suited as a source of revenue for local governments.

Here are disadvantages of property taxes:

  1. It’s not perfect and often not popular. Nonetheless, remember that taxes are never popular and they are never perfect as well.

  2. Its transparency could reveal inconsistencies, which may be magnified in public perception.

  3. 3. Its confidentiality hides the actual results of the assessed home or property value.

In a property tax, each and every piece of land or real property is assessed regardless of its size. It includes the land and all permanent structures attached and built into it. While real property taxes are assessed, not all of them are taxable. Some, like religious or government owned properties are totally exempt from paying property taxes. Others are partially exempted from paying taxes such as those war veterans who qualify for an exemption on a part of the property tax on their homes and homeowners who are eligible and qualify for the STAR program or the School Tax Relief.

The tax rate is determined by the amount of tax levy and has several steps in determining the amount. First, the taxing jurisdiction adopts and develops budget revenue from all sources aside from property taxes. These are deducted from the original budget and the remaining amount becomes the tax levy.
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