Real Estate Taxes
What Is Real Estate Taxes?
Real estate taxes, also called property taxes, are taxes assessed by local governments on real property such as land, homes, and commercial buildings. These taxes are typically based on the assessed value of the property.
Property owners pay real estate taxes annually or through monthly payments included in mortgage escrow accounts.
Why It Matters
Real estate taxes help fund essential local services such as public schools, police and fire departments, road maintenance, and community infrastructure.
For homeowners, property taxes represent an ongoing cost of owning real estate and can influence housing affordability.
How Real Estate Taxes Works
Local governments determine property tax rates and assess property values.
The tax amount is generally calculated using:
- the assessed value of the property
- the local tax rate (millage rate)
Property owners may pay taxes directly or through their mortgage lender if the taxes are included in an escrow account.
Example
If a home is assessed at $300,000 and the local property tax rate is 1.2%, the annual real estate tax would be $3,600.
Real Estate Taxes vs Income Taxes
- Real estate taxes are based on property ownership.
- Income taxes are based on earnings or income.
FAQs About Real Estate Taxes
Who collects real estate taxes?
Local governments such as cities, counties, or municipalities.
Can real estate taxes be deducted?
Some property taxes may qualify as itemized deductions depending on tax laws.
Do property taxes change over time?
Yes. Tax rates or property assessments may increase or decrease.
Related Terms
