Property tax is money collected from real estate investments from individuals who bought the property. Whether it is a house, building, apartment, or other real estate investment, property taxes are always there to balance out the economy. The tax later goes into government funding for schools, police services, water, libraries, hospitals etc, for the city, and its residents. Property taxes are usually deductible on tax statements at a certain limit; in California it would be $10,000 and $5,000 for each individual married filing separately.
How is property tax determined?
Equation: Assessed value x tax rate = Property tax value
The property tax is determined by assessors who measure the value of the property and it is then multiplied by the percentage of the tax rate for the year. Assessors usually base your home price on the market and the purchase price of your house. Tax rates vary depending on what state you live in, but it could change from year to year to balance the real estate market. Every property varies in terms of value due to the size and quality of the house. Anytime remodeling or installment is done to the house, it will increase the value of the property, therefore increasing the property tax on it.
Difference between Real and personal?
Real means actual property that exists such as land, buildings, or anything permanently attached to the property that is owned. Personal would mean it is not affixed to the land or property and could be identified as movable. Personal expenses are things like equipment that is bought, vehicles, stocks, bonds, etc, which are all classified as personal property.
The assessment limit ensures that as the property and tax rate increase in value, the tax rate percentage does not go past the fixed amount. For example, if the assessment limit is 2 percent in California the tax rate will not surpass 2 percent since it is the assessment limit. It puts the tax rate below the average market price, stopping the owner’s tax burden from going up. Until the property is sold to someone else, the rate will reset to the regular market price, but as of now in California, the increase can be no greater than 2 percent annually. This limit saves the tax rate from continuing to grow so the taxpayer could still afford the property that they purchased.
This is a type of special property tax that some homeowners may incur in their district to fund different government activities. If your local town needs some extra funding to help schools, libraries, and other governmental services, a tax election could be held within the district where taxpayers can vote if they want everyone who owns property in the district to have a parcel tax to generate more revenue for governmental activities through their real estate. The parcel tax is utilized to generate government revenue, so they are able to continue providing services to people in the district in order to stabilize the economy.
Thank you for reading,