Property Tax

In layman's terms, property tax is the tax that we must pay on property that we own as people or as a business. The amount of tax that must be paid is determined by the local government and varies depending on a number of criteria.

This is not a one-time payment, but one that must be made to the local government or municipal corporation either annually or semi-annually. Property tax must be paid on 'Real Property,' which includes all real estate improvements done to land, such as buildings or land adjacent to buildings. You must pay property tax if you own and live in a residential or commercial property, if it is rented out, or if it is left unoccupied.

Importance Property Tax

1. Property tax money is highly vital to the government since it is used to maintain and provide civic facilities that we as residents require.
2. Consider the basic things we need to live a comfortable and healthy life, such as laying new roads to improve connectivity and conducting road repairs, laying sewer pipes to repair sewer systems, arranging for adequate streetlights and safety measures, and maintaining common areas such as parks, and so on.
3. The government relies heavily on the taxes we pay, particularly property tax.

How to Calculate Property Tax

The good news is that the amount of property tax you must pay varies from state to state and area to region. So, if you own a house in Mumbai and another in Chennai that is the same size, you will pay two quite different amounts in property tax for each.

This is due to the fact that different taxing authorities use different methods to determine the amount of property tax you must pay. When you think about it, the whole situation may not seem fair, thus there is a common rule that all tax collecting authorities apply, which is based on the formula -

Property tax 2021-2022 = Base value x built up area x age of the property x type of property/building x category of usage x floor factor.

Property Tax Exemptions

The following are four frequent property tax exemptions:

Homestead:

This exemption can assist homeowners in lowering state property taxes and shielding surviving spouses from creditors. State laws and protection limits may differ. The exemption is only available for principal residences.

Persons with disabilities:

Property taxes on a lawful residence can be reduced for qualifying disabled homeowners. Partial exemptions are provided by local governments and educational districts.

Senior citizens:

Local governments or school districts can grant qualifying seniors property tax breaks. These are often restricted to major residences.

Veterans / Disabled veterans:

Property tax exemptions are available to veterans from their state, county, and city. The amount they get may also be determined by their handicap classification.

Most states and counties include property tax exemptions in addition to the complete exemptions granted to religious or nonprofit organizations. These specialized exemptions often provide a reduction of up to 50% of the taxable value. However, rates vary by location.

Key Takeaways

• Property owners pay property taxes that are determined by the local government in which the property is located.
• Property tax is based on the value of the property, which might be real estate or tangible personal property in various countries.
• Water and sewer improvements are funded via assessed taxes.