What is 'Property Tax'
Property tax is a tax assessed on real estate. The tax is usually based on the value of the property (including the land) you own and is often assessed by local or municipal governments.
This tax is mainly used by municipalities for repairing roads, building schools and snow removal, or other similar services. Rates of property taxes and the kinds of property considered taxable by the local government vary somewhat in different municipalities and states. As such, when purchasing property in a new state, it is important for individuals and businesses to carefully examine the tax laws of their new locality.
Generally speaking, the value of property taxes is determined by multiplying the property tax rate by the current market value of the property in question, which is periodically recalculated by municipalities.
Almost all property taxes are levied on real property, which is a property that has been legally defined and classified by the state apparatus. This includes land, buildings or other immovable improvements to the land which increase the value of the real estate: for example, an irrigation system on a farm. Personal property – individually owned, movable property – is generally not subject to property taxes, though personal property may have been taxed at the state level upon the initial sale.
Ultimately, property owners are subject to the rates determined by the municipal government. A municipality generally hires a tax assessor (or uses their own), who assesses local property and assigns property taxes to owners based on current fair market values. The payment schedule of property taxes varies by locality, and in almost all local property tax codes, there are mechanisms by which the owner can discuss their tax rate with the assessor, or formally context that rate.
In most OECD countries, immovable property tax represents a low proportion of federal revenue compared to income taxes and value-added taxes, although the rate in the United States is substantially higher than in many European countries. Many empiricists and pundits have called for an increase in property tax rates in developed economies, arguing that the predictability and market-correcting character of the tax encourage both stability and proper development of real estate.