What is a Property Tax?

A property tax is a tax on any type of owned property, levied on the property's owner by a state, local, or national government. In the past, property taxes were often collected on many types of wealth. Today, however, the most common form of property tax collected on to land and fixed improvements, such as buildings.

The most common method of calculating property tax depends on two important measurements. The property's assessed value is the base taxable value of the property to be taxed, and the property tax rate or millage rate is the actual tax rate levied on the assessed value of the property. For more details, see calculating property tax.

Who decides how much property tax must be paid?

Unlike income taxes, property taxes are not self-assessed. Your local tax assessor determines the taxable value of your property, and sends you a yearly tax bill based on their appraisal. The overall property tax bill will often be broken down into individual line items. In some counties, these line items may include taxes collected by your city government, county, local school district, or other local entities. Common components of a property tax include:

  • School District Taxes
  • Municipal Garbage Disposal Fees
  • Municipal Utility Fees
  • Library Fees
  • General County Fund Taxes

While all of these individual taxes are generally considered to be included in your total property tax, keep in mind that some line items may not be deductible as a property tax on your Schedule A.

How do you pay property taxes?

Your tax assessor will send you a property tax statement several months before your property tax is due. The property tax bill will usually include an itemization of the various taxes that make up your total property tax. Your total property tax liability for the year will be listed in a prominent place on your statement. Payments are uaually due to your county treasurer and can be made in person, through the mail, or (in some counties) online.

If you have a mortgage on your home, your lender may require you to pre-pay your property taxes to an escrow account or bundle them in with your monthly mortgage payments. In this case, they will pay your property tax bill on your behalf. It is, however, a good idea to double-check your property tax statement and your mortgage statements to ensure the proper amount is being paid.

What happens if I don't pay my property taxes?

Property tax bills are usually sent at the beginning of each new year. Once the bill has been sent, property taxes are attached automatically to the deed of the property on which they are due.

If taxes are left unpaid beyond the deadline, delinquent property taxes can turn into a lien against the property. If the lien isn't removed by paying the tax due, the property could be foreclosed on and sold in a tax delinquency sale.

REMEMBER: Property tax liens will show on your credit report! Unlike other negative credit items, which can disappear after a certain amount of time, tax liens are often included on your credit reports indefinitely. Make sure you pay off any delinquent property taxes before your county reports the lien to the three major credit bureaus.

Learn more in the Property Tax FAQ