Real estate taxes are levied on property by governments based on its value. The taxable value is used to calculate the tax based on a levy rate. Some jurisdictions have rules to protect those with limited income but valuable property. Local governments rely heavily on property taxes to support themselves and may increase real estate values to increase tax revenue. Homeowners may receive special considerations to reduce the amount paid in property taxes.
Real estate taxes, also known as property taxes, are levied on real property by a government for services rendered. These taxes are generally based on the relative value of the property. The more expensive the property, the higher the taxes will be for that property.
To determine property taxes in most of the US, the taxable value of the property is taken, which may not be the same as the assessed value, and then the tax is calculated based on the levy rate. This rate is often listed as a value per $100 United States Dollars (USD) of the property’s value, or per $1,000 USD of the taxable value. This helps people understand exactly how their value affects their taxes.
While these taxes are somewhat controversial, there is a substantial story behind them. Some say they are fair simply because the tax is progressive. It is argued that people with higher property values will have the ability to pay more, simply because they were able to afford more expensive property. However, some homeowners have seen values increase without experiencing a significant increase in their income.
To help protect people who have limited income but valuable property, some jurisdictions have imposed rules to help protect them from unreasonable taxes. In some cases, the wards even freeze them at a certain level, as long as the property maintains the same owner. In other cases, valuation increases may only be a percentage of the annual inflation rate.
For homeowners, there are sometimes special considerations that help reduce the amount paid in property taxes, especially on a primary residence. The owner may receive a homestead exemption. In some US states, owner-occupied residential property can be valued at a lower rate than other types of property, such as commercial and industrial. This class difference can also create controversy and lead to accusations of being discriminatory.
In the United States, real estate taxes are regulated at the state level. In many states, they go strictly to support a local government, such as a township, county, or both. Some of the money may also go to the state, but this portion is usually much less than what is given to local governments.
Due to this heavy reliance on property taxes, local governments are often interested in increasing real estate values by increasing the tax base. This is a system design, which hopes to encourage local governments to actively participate in economic development efforts. Economic development means improvements to the property, increasing its value and generating more income. However, in some cases, local residents may criticize their cities and counties when homes are assessed at a certain amount of tax. They may claim that the assessed value is not in accordance with the market value, and that it may be a way to collect more revenue without increasing the actual collection rate.
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