Are Property Taxes Fixed or Variable?
Understand why property taxes are variable. Your bill is determined by your home's assessed value and the tax rates set by local government budgets.
Property taxes are variable and can change from year to year. These taxes are a primary funding mechanism for local government services, including public schools, law enforcement, fire departments, and the maintenance of roads and parks. The amount a homeowner pays is subject to periodic adjustments based on several factors, ensuring the tax collected aligns with both current property values and the budgetary needs of local jurisdictions.
The Components of Your Property Tax Bill
Your property tax bill is based on two elements: the assessed value of your property and the local tax rate. The assessed value is the valuation placed on your property by a government assessor for tax purposes. This figure is distinct from the market value, which is the price your home might sell for. In some jurisdictions, the assessed value is a percentage of the market value, determined by a local assessment ratio.
Once the assessed value is established, it is multiplied by the local tax rate to determine the tax liability. This tax rate is expressed as a “mill levy” or “millage rate,” where one mill represents one dollar of tax for every one thousand dollars of assessed value. The formula is: Assessed Value x Tax Rate = Property Tax Bill. Different government entities, such as your city, county, and school district, each set their own tax rates, which are combined into a single rate.
Factors That Change Your Property’s Assessed Value
One reason your property tax bill fluctuates is that its assessed value can change. Local governments conduct periodic reassessments of all properties to ensure values reflect current real estate market conditions. These reassessments can occur annually or every few years, depending on local regulations, and aim to distribute the tax burden equitably among all property owners.
Specific actions you take as a homeowner can also trigger a change in assessed value. Significant property improvements, such as building an addition or remodeling a kitchen, increase the market value of your home. Assessors account for these improvements, which raises the property’s assessed value and the amount of tax owed.
General market fluctuations within your local area can also lead to increases or decreases in property values. If home prices in your neighborhood are rising, this trend will likely be reflected in a higher assessed value during the next reassessment cycle. Conversely, a downturn in the local real estate market could lead to a lower assessed value.
How Local Government Budgets Influence Tax Rates
The second variable in your property tax bill is the tax rate, which is tied to the financial needs of local governments. Each year, city councils, county commissions, and school boards determine their budgets. They calculate the revenue required to fund public services and then set a tax rate that will generate the necessary funds from the total assessed value of all property.
When residents vote in favor of measures like a bond to build a new school or a special levy to fund expanded library services, this directly authorizes an increase in the tax rate. The additional revenue is specifically earmarked for the voter-approved purpose, leading to a higher overall millage rate for all property owners within that taxing district.
Increases in the operating costs of a municipality can also force a change in the tax rate. Inflation, rising healthcare costs for public employees, or the need for more police officers can all contribute to a larger municipal budget. To cover these increased expenses, the governing body may need to adopt a higher tax rate.
Available Property Tax Relief and Exemptions
Homeowners may be able to lower their property tax burden through relief programs and exemptions. These programs work by reducing the taxable value of a property, not by changing the tax rate. The most common is the homestead exemption, available for a property that serves as the owner’s primary residence. This exemption removes a specified amount from the property’s assessed value.
Other forms of relief are targeted toward specific groups. Many jurisdictions offer exemptions for senior citizens, which can range from a reduction in assessed value to a complete freeze on the tax amount. Similar programs are often available for veterans, particularly those with disabilities, and for individuals with qualifying disabilities.
Eligibility for these programs is not automatic and requires an application. Homeowners must meet specific criteria related to age, income, residency, or disability status. To determine if you qualify, contact your local tax assessor’s office for information on the programs offered, the eligibility requirements, and the necessary forms.