Glossary
Property Tax

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

Property tax money is highly vital to the government since it is used to maintain and provide civic facilities that we as residents require.
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.
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.

Recommended Reading

The Rise of Subscription-Based Bookkeeping Services: Is It Right for Your Business?

Subscription-based bookkeeping services are transforming the way businesses manage their finances, offering predictable pricing, scalability, and automation-driven efficiency. Instead of paying hourly or hiring in-house staff, businesses can now access professional bookkeeping on a fixed monthly or annual subscription model. These services provide essential financial functions like transaction reconciliation, financial reporting, payroll processing, and tax compliance, often integrating with cloud-based accounting software for real-time insights. While this model is ideal for small to mid-sized businesses looking for cost-effective and flexible solutions, it may not suit companies with complex financial needs requiring personalized attention. Businesses considering a switch should evaluate service offerings, scalability, integration with accounting tools, and access to financial expertise to determine if subscription-based bookkeeping is the right fit for their long-term financial strategy.

Beyond Basic Bookkeeping: How CFO-Level Insights from Bookkeepers Improve Decision-Making

Modern bookkeeping services go beyond basic record-keeping, offering CFO-level insights that help businesses improve cash flow, optimize expenses, and make data-driven financial decisions. Strategic bookkeepers provide real-time financial intelligence, track key performance indicators (KPIs), and ensure businesses remain audit-ready and investor-friendly. By leveraging advanced bookkeeping services, businesses can enhance profitability, improve budgeting, and navigate tax compliance with greater confidence—all without hiring a full-time CFO.

Real-Time Bookkeeping: The Key to Smarter, Faster, and More Profitable Financial Management

Real-time bookkeeping revolutionizes financial management by providing businesses with instant access to up-to-date financial data, improving cash flow tracking, expense management, and profitability analysis. Unlike traditional bookkeeping, which relies on periodic updates, real-time bookkeeping ensures continuous transaction recording, automated reconciliation, and real-time financial reporting. This allows business owners to make faster, data-driven decisions, reduce errors, enhance tax compliance, and stay audit-ready. By leveraging cloud-based accounting tools and AI-driven automation, businesses can optimize financial strategy, scalability, and overall efficiency, making real-time bookkeeping an essential tool for growth and long-term success.