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How to Calculate Your Property Taxes

How to calculate your property taxes

Understanding how to calculate property taxes is a valuable skill that each rental property owner needs to develop.

For starters, the amount of property tax you will need to pay on any property should be part of your initial calculations when purchasing a home. Moreover, property taxes will continue to play an important role in your cash flows and budget for as long as you keep the property.

To calculate the property tax for residential real estate, consider the following:

Fair Market Value: This is the value that an informed seller would be eager to pay for the property.

Assessed Value: The property’s assessed value is calculated on the basic features, most recent purchase price, and comparable properties. In general, the property’s estimated value will be nearby 80% to 90% of the fair market value.

Mill Levy: This is the tax assessment rate for real estate in your neighborhood. The local tax rate is normally published on the local tax assessor’s website.

calculate your property taxes

With these statistics in hand, you can proceed to calculate your property tax. Simply get mill levy (tax assessment rate) and multiply it by the property’s assessed value to get the annual tax amount you should pay. For example, if the assessed value of a property is $400,000 and the mill levy for your location is 4%, the annual property tax you will end up paying is about $16,000.

Alternatively, you can use an online calculator to help you estimate your yearly property tax. All you need is to get your property’s address and sales price, both of which can be easier to get a hold of than some other records. The main downside of this method is that it cannot deliver an exact number, though the estimate can be close.

Lastly, you can discover a property tax amount by searching the most recent property tax bill for any house on your local tax assessor or the municipality website.


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