How to Calculate Your Property Taxes: Ultimate Guide

How to Calculate Your Property Taxes: Ultimate Guide
Photo by Hiroshi Kimura / Unsplash

City and county governments rely on property taxes as a source of income and use them to provide various services. There are various factors that come into play when calculating these property taxes, such as the assessed value of your property and the mill levy or tax rate in your area. It is important to be aware of what you need to pay because property taxes can be a big expense, and you don’t want to be blindsided. If you understand how they are calculated, you can make sure that you are not being overcharged. 

The market value of the property

The market value of a property is based on the market conditions at the time. It is always important when buying a property to perform due diligence to determine whether it is a good investment. Part of the process is considering what property taxes you will have to pay, as they can make up a large part of monthly expenses. 

If you have questions, you can reach out to a local property management company to help you evaluate properties and your local market. Evernest, Mynd, Pioneer and KeyRenter offer rental property management in Denver services and will assist you if you’re looking for a property worth investing in.

The assessed value of the property

Tax municipalities use a slightly different number than the market value, and this is its assessed value. Tax assessors will usually assess the value of a property every one to five years. They calculate this value by taking various factors into account, such as the paperwork and permits filed with local municipalities and the basic features of a home. 

Its square footage and the number of bedrooms and bathrooms are taken into account, but the size is not the only consideration. Assessors often use a combination of methods such as looking at comparable sales in the area, replacement costs for the property and whether income is made from the property. 

When looking at comparable sales, tax assessors will look at the location of the property, its condition, any improvements and the overall market conditions. 

When taking replacement costs into account, tax assessors have to consider how much depreciation has taken place on an older property. On a newer property, they deduct reasonable depreciation and then look at the cost of materials and labor and include them in the final figure. 

Considering income involves looking at maintenance costs, property management costs, insurance, taxes, and the return you can reasonably expect to get from the property. 

Sometimes the assessed value is fairly close to the market value. The assessed value is usually about 80 to 90% of the market value. Once tax assessors have determined the assessed value of a property, they send this to the property owner and then send a tax bill. 

The assessed value of the property is part of the public record, so property owners can go to the tax assessor’s website and see how much they have to pay by entering the property address. They may be charged a small fee to access the information. The assessor’s office at a county courthouse also has the information on record. 

The mill levy

The mill levy is the tax assessment rate for real estate in your area. It can vary significantly based on factors such as the public amenities in the area. Property taxes are higher in areas with desirable school districts, plenty of parks, a lack of crime etc. The property levy tax for an area can be found on the municipal website. 

How to calculate property taxes

It may seem complicated, but it is actually simple to calculate property taxes. To calculate them, you multiply the assessed value of the property by the levy. For example, if your home is worth $250,000 and the levy is 3%, you will pay taxes of $7,500 per year. You don’t have to calculate your tax on your own – it is easy to find property tax calculators online, where you enter the location of your property and its assessed value to find out what you have to pay.

Useful property tax facts

To pay the right amount of tax, it helps to understand how it is calculated, where you can find the information, when tax bills are sent and when they are due. In some cities, it is possible to pay property tax bills online. 

There are property tax exemptions offered to certain demographics, such as senior citizens or disabled homeowners, and there are also religious exemptions. 

You can appeal your property taxes if you feel you are paying too much or your taxes have increased significantly without an obvious reason. Hiring a property tax expert is worthwhile as they can quickly determine if this is the case or not and help you save tax if your property is over-assessed. 

The content published on this website is for informational purposes only and does not constitute legal advice.

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