RESOURCES

What Are Property Taxes?
What Are Property Taxes?
Property taxes boil down to paying somebody for the honor of living somewhere. And as property taxes fund local services like libraries and firefighting, they are worth paying. A major debate in the Childfree community is over whether it’s fair for people without children to pay for schools that they won’t use, but everyone pays for police and firefighters and hope never to use their services. Here’s a few considerations for property taxes.

Property Taxes 101

Property taxes are assessed at a local level, and how this happens will depend on your state. It could be by county, city, or other municipality. Different parts of the same area are often charged differently, based on the assessed values of properties. We’ll discuss assessments a little more in the next section.

And property taxes aren’t just on your home; depending on where you live, you might also owe property taxes on your vehicle or even equipment you own to run a business. For your home, property taxes might be added to your mortgage payment, or you may have to pay them once or a few times a year at a local office in your area.

Property Tax Assessments

Property taxes are calculated using an assessed value of the property in question. You are allowed to fight the assessment, if you feel it was inaccurate, and if you win, your property tax bill will be reduced. For example, if the assessed value of your home is $300,000, but the homes around yours are selling for $250,000, you may have a case. But if your home has proven reasons to be valued higher (more bedrooms or an extra bathroom, for example), you may be stuck with the higher value.

You may also be able to contest vehicle property taxes, but this might also be a battle you can’t win. If you could sell your car for $500, but Kelley Blue Book value is $3,000, it’s in the best interest of the municipality to tax you on the book value. Thankfully, there are ways to get property tax exemptions.

Property Tax Exemptions

You may qualify for a reduction in your property taxes on your primary residence based on a number of factors. In some states, this is called a homestead exemption. You could qualify if you’re a senior, disabled, or a veteran. Since property taxes are locally based, you can search for information based on your local area. It’s important to check what you might qualify for before tax bills are assessed (often annually).

Property Taxes Are a Balancing Act

Like other taxes, if you want to reduce the amount you pay in property taxes, it’s a balancing act. If you’re Childfree, the silver lining is that you don’t have to live in a set area to keep children in a certain school system, so you can investigate moving to other areas with lower taxes. Note that while you may pay a lot less to live in a rural area, the trade-off will be that you’ll have less access to services. So bear that in mind when looking at property taxes, and consult with a Certified Financial Planner for more information.