Understanding Property Tax

When the word 'property' comes up, the word 'taxes' spring to the mind. Well, its natural because both are like two sides of the same coin. Property tax is that amount of money which the owner of any real estate property is expected to pay to the local government body. There is one type of tax which is sometimes confused with the property tax. This tax is known as special assessment tax.

These are two distinct forms of taxation. The first one is that which tends to rely on the fair market value of the property being taxed for justification. The other relies upon a special enhancement known as benefit for its justification. In any system of taxation, there are three stages which are attendant on the imposition of any tax. These are levy or declaration of liability, assessment and collection.

The foremost is the legislative function, the second one is the quasi-judicial and the last one is execution function. At times of resolving of levying the property tax by the local authority, the council passes a resolution to levy the tax. This resolution should specify the rate at which and date from which the tax shall be levied.

An important benefit of a tax on property over a tax on income is that the revenue always equals the tax levy. This is totally unlike income or sales taxes, which can result in shortfalls producing deficits. The property tax always produces the required revenue for municipalities' tax levies. Unfortunately, the sad aspect of property tax is that it tends to bring negative impact on individuals with fixed incomes such as the elderly, or those who have lost their jobs. The assessment is usually made up of two components -- the improvement or building value and the land or site value. The public official who determines the value of real property is called the tax assessor.

There are also various guidelines for determining the annual value of the property. These are:

Basic value- This basic value is being fixed in all municipalities for different zones for purpose of taxation of annual rental value of the buildings and lands. This basic value may be based on per sq ft per month of residential properties.

Depreciation- Some sort of discount may be given to the individuals. However, this discount or rebate or depreciation is fixed.

Occupation- A discount of 30% is given where buildings are occupied by the owners themselves.

Nature of building- The classification of buildings can be categorized as thatched, tiled and R.C.C .

Ceiling- There is several ceiling fixed for enhancing the taxes consequent on the quinquennial revision of property tax.

So these are some of the guidelines which are employed by the government for determining the property tax of various properties.

If a person owing a property is unable to pay property tax, the government may place a lien to the property and put that on auction. Real estate foreclosure investing is really profitable as purchase of lien certificates may be worth your investment.

But note that every state has different set of rules and laws pertaining to the lien tax properties and tax lien foreclosures. Remember always that the government has every right to take the property tax from the person owning a property anywhere.

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