Property taxes are charges that the government levies that correspond to what you own, instead of what you earn or spend. Homes and other real estate are frequently taxed, but real estate taxes aren't the only types of property tax. Many jurisdictions also levy property taxes on personal property like cars or even business assets like machinery.
The Mill Rate
Property taxes are sometimes called millage taxes because they are frequently charged on a "per mill basis." A mill rate is equal to a rate per thousand dollars. For example, a mill rate of $10 per $1000 of value would lead to $5,500 in property taxes on a $550,000 house.
Determining Property Values
Property taxes consist of two variables. While the mill rate determines how much tax you pay on the value of the property, the assessed value determines what the property's value is. Different governments use different methods to assess property values, including setting the value on the basis of what you paid for the property or periodically changing it based on market conditions. Since property taxes correspond to asset values, they're also sometimes called ad valorem taxes.
Other Property Taxes
Your house isn't the only asset that you own on which you're paying property taxes. Many states, counties or cities levy a property tax on your vehicles as a part of your registration fee. Other vehicles, including watercraft and airplanes are also subject to property taxes. In addition, businesses also pay personal property taxes on their tangible assets like machinery and furniture in some communities.
Property Tax Deductions
If you itemize your income taxes, you get a portion of what you spend on your property taxes back. In addition to allowing you to deduct your real estate property taxes, the IRS also lets you write off all of your personal property taxes on Schedule A. Unfortunately, you lose the property tax deduction if you have to file the Alternative Minimum Tax.
- Investor Words: Mill Rate
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- Office of the Assessor, County of Los Angeles: Boats and Aircraft
- Municipality of Anchorage: Business Personal Property
- IRS.gov: Schedule A (Form 1040)
- IRS.gov: Form 6251 - Alternative Minimum Tax -- Individuals
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