How Are Property Taxes Calculated?

Property taxes are a significant expense for homeowners and a crucial source of revenue for local governments. Understanding how to calculate these taxes and learning about strategies to potentially reduce them can help you better manage your finances. Our team at Pasquesi Sheppard LLC in Lake Forest, Illinois, will give you guidance on how to calculate property taxes and provide insights that can help lower the tax burden on your home.

Property Tax

The Basics of Property Tax Calculation

You can calculate property taxes using a simple formula:

Property Tax = Assessed Value × Tax Rate

The two key components you need to calculate your property taxes are the assessed value and tax rate. However, determining the assessed value and applicable tax rate can be complex and vary by jurisdiction.

Assessed Value

The assessed value is the dollar value assigned to your property for tax purposes. It’s important to note that this value may differ from the market value of your property. Here’s how it’s typically determined.

Property Appraisal

Local tax assessors evaluate properties periodically, often annually or bi-annually. They consider factors such as location, size of the property, age and condition of structures, recent improvements or renovations, and comparable sales in the area.

Assessment Ratio

Some jurisdictions apply an assessment ratio to the appraised value. For example, if the assessment ratio is 80% and your property’s appraised value is $300,000, the assessed value would be $240,000 (80% of $300,000).

Exemptions

Many areas offer exemptions that reduce the assessed value for certain property owners, such as homestead exemptions for primary residences or exemptions for seniors and veterans.

Tax Rate

The tax rate, also known as the millage rate, is set by cities, counties, school districts, and other local entities that provide services to your area. It’s usually expressed as a percentage or as mills, where one mill equals $1 of tax for every $1,000 of assessed property value. The total tax rate is often a combination of rates from different taxing authorities. For example:

  • City tax: 0.5%.
  • County tax: 0.3%.
  • School district tax: 1.2%.
  • Total tax rate: 2%.

Example of a Property Tax Calculation

Suppose you own a home with an appraised value of $300,000 in an area with an 80% assessment ratio and a total tax rate of 2%. Here’s how to calculate the property tax for such a home:

Assessed value: $300,000 × 80% = $240,000

Property tax: $240,000 × 2% = $4,800 per year

This means you would owe $4,800 in annual property taxes, typically paid in installments throughout the year.

Strategies To Reduce Your Property Tax

While property taxes are inevitable for most homeowners, there are several strategies you can employ to reduce your tax burden.

Review Your Property Assessment

Carefully examine your property tax assessment for accuracy. Look for errors such as:

  • Incorrect square footage.
  • Inaccurate number of bedrooms or bathrooms.
  • Overlooked property condition issues.

If you find discrepancies, contact your local assessor’s office to request a correction.

Appeal Your Assessment

You’re entitled to appeal if you receive an unreasonably high property assessment. Here are steps you can follow to appeal your assessment:

  • Research comparable properties in your area to support your case.
  • Gather evidence of factors that might lower your property’s value, such as needed repairs or undesirable nearby developments.
  • Submit an appeal with the local assessment review board within the stipulated timeframe.
  • Present your case in person or in writing, depending on the local protocol.

Apply for Exemptions and Deductions

Many jurisdictions offer property tax exemptions and deductions that can significantly reduce your tax bill. Common exemptions include:

  • Homestead exemption for primary residences.
  • Senior citizen exemptions.
  • Veteran exemptions.
  • Disability exemptions.

Contact your local tax assessor’s office to learn about available exemptions and application procedures.

Postpone Property Renovations and Remodeling

Carrying out major home improvements can hike your property’s assessed value. If possible, consider postponing significant renovations until after the next assessment period.

Check for Errors in Tax Bills

Carefully review your property tax bills for errors, such as incorrect tax rates or failure to apply eligible exemptions. Report any discrepancies to your local tax office promptly.

Participate in Local Government Activities

Attend local government meetings and engage in discussions about property tax rates and spending. Engaging in the political process can help you share your opinion when the local government makes decisions regarding property taxes.

Consider Tax Abatement Programs

Some areas offer tax abatement programs to encourage property improvements or economic development. These programs may provide temporary reductions in property taxes. Contact your local tax authorities to know whether such programs are available in your area and if they apply to you.

Maintain Accurate Records

Keep detailed records of your property’s condition, including photographs and documentation of any issues that might affect its value. This information can be valuable if you need to appeal an assessment in the future.

Understand Your Area’s Assessment Cycle

Knowing when assessments occur in your area can help you plan home renovations and appeals more effectively. Some jurisdictions reassess annually, while others do so less frequently.

Consider Professional Help

If you’re dealing with a complex property tax issue or a high-value property, it may be worth consulting with a property tax professional. If you own a property in Lake Forest or any Chicago area, Pasquesi Sheppard LLC can provide expert guidance on assessment procedures and appeal strategies.

Understanding how to calculate property taxes is the first step in managing this significant expense. By familiarizing yourself with the assessment process and trying the above reduction strategies, you can take a proactive approach to your property tax obligations.

Lower Your Property Tax Burden With Expert Guidance From Pasquesi Sheppard LLC

At Pasquesi Sheppard LLC, we understand the complexities of Chicago and Lake Forest property taxation and are here to help. Our experienced team can provide guidance on property tax matters, assist with assessment appeals, and help you navigate the intricacies of local tax regulations. Whether you’re a homeowner looking to reduce your tax burden or a business owner managing multiple properties, we’re here to support you. Contact us today to learn about how our expertise can help you ensure you’re not paying more in property taxes than necessary while remaining compliant with all applicable laws and regulations.