iowahomeloans

Understanding Property Taxes

Posted on: May 15, 2013

Property taxes are a big question mark for most new homeowners. Aside from the mortgage payment itself, property taxes are typically the next largest expense for new homeowners. It’s important to understand how property taxes are determined to plan for your property tax payment – and whether you might be better served to look elsewhere because property taxes are on the increase.

 

What’s the Aggregate Tax Rate and What Does It Include?

When you pay property taxes, you aren’t just paying a single tax. Your aggregate tax rate is a combination of all of the individual taxes that apply to your property. You’re typically paying a county tax, a township rate, something for the school district, a city rate if you live within an incorporated municipality, and rates for any special districts, such as fire and sanitary, which service the area. Your aggregate rate is a total of all of the taxes that apply to your property, and is subject to change if there is a change to any individual rate. It’s a good idea to look out for any big projects on the horizon that a district may elect to fund by raising your property tax.

 

How are Assessed Values Determined?

The property tax you pay is based on the assessed value of your home. Property tax assessment procedures vary depending on the assessing office, so you’d need to consult your local tax assessor to determine the exact formula used. Typically, assessors look at either the market value of your home, or the cost approach – i.e. how much it would cost to replace the structure with a similar one, plus the cost of the land – and determine the tax assessment as a percentage of this value. Some places assess at 100%, while others assess at a lower percentage. They may also look at renovations and improvements to the property – so if you’ve filed a permit but haven’t completed the renovation, your property may be over-assessed.

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