county tax property

Tax reassessment has been the main topic of discussion more times in the last six months than it has been in the last ten years.  There seems to be a misguided assumption that if property values decrease then property taxes will also decrease.  Of course, this is based on the fact that when property values increase so will the taxes.  Unfortunately, the former is mostly false while the latter is mostly true.

Like everything else, all you have to do is follow the dollar to see why it works this way. I’ll explain.

Every county, city and municipality across the country needs money to pay for basic services such as the police, firemen, schools, payroll…and the list goes on. This money, in large part, is provided for by property taxes.

Let’s assume this year is a tax reassessment year and your county needs ten million dollars to meet its budget demands, up from eight million three years ago. This amount includes the basic services described above along with all current and future projects that have been approved by the board of trustees.

Once the budget amount has been calculated (ten million) the tax assessor will reassess the property values in order to meet the budget amount.

The tax assessor will take into consideration the estimated property value, proposed assessed valuation, state equalizer, exemptions and the current tax rate when establishing property taxes.

The following is an example:

Let’s say your home is worth $100,000 and the county has your assessment level at 10%.  Your tax will show a home value of $10,000. This is called a Proposed Assessed Valuation.

The tax assessor takes the Proposed Assessed Valuation and multiplies this by something called a State Equalizer.  In this example, the State Equalizer is 2.8439.  When you multiply the Proposed Assessed Valuation with the State Equalizer you’ll get the Equalized Assessed Value, or $28,439.

Once the tax assessor knows the Equalized Assessed Value he’ll subtract any type of exemptions you might have such as a home owner’s exemption or a senior’s exemption.  If this home is your primary residence then you’ll qualify for the home owner’s exemption of $5,500.  This means your Adjusted Equalized Value is $22,939.

Finally, the tax assessor will multiply the Adjusted Equalized Value with the Tax Rate which is adjusted every tax reassessment year.  This year, the tax rate is 10%.  When the Adjusted Equalized Value is multiplied by the tax rate ($22, 939 x 10%), the resulting number is your estimated property tax bill or $2,293.

Ok, now we’ll put it all together.

We know the county needs ten million dollars to meet its budget. However, the tax assessor has valued your home at $90,000 instead of $100,000. 

Logically speaking you should only have to pay $2,009.51.

Breaking it down would look like this: $90,000 x .10 x 2.8439 – $5,500 x .10 = $2,009.51.

However, just because your property value went down doesn’t mean the county budget obligations have gone down. The county still needs its ten million dollars regardless of what happens to your property value.

So how does the county get away with collecting the same amount in property taxes (or even more!) when your assessed property value decreases?

Simple!  They adjust one of the other variables, most likely the tax rate. 

Let’s say the tax assessor did indeed lower your assessed property value to $90,000 but the county still needs the original of $2,293. In fact, they need a little more. By raising the tax rate from 10% to 15% you’ll pay $3,014.26 in property taxes.  Again, here is the breakdown:

$90,000 x .10 x 2.8439 – $5,500 x .15 = $3,014.26.

Do you see what just happened? Your home value went down ten percent but your taxes still went up.

The bottom line no matter what your property value is the county will always get the money it needs to meet its budget.

Steve Hattan is a true real estate professional and expert who has listed well over one thousand properties and has saved his clients in excess of five million dollars in commissions and fees. Steve can be contacted through his Personal Blog or through his real estate website http://www.affordablelistings.com.

Late property tax notice from county?

I did not receive my first tax notice in the mail on time from the county for my new home until they sent me a late notice. They said they did not have the correct address to send the first bill. Finally when the tax bill arrived it was overdue with a nice fine. They seemed to find my new address after when the taxes were overdue. Should I have been more proactive and just paid my taxes on time instead waiting for the bill in the mail. My question is who is responsible and are other people running into this situation? Is there some of type of consumer protection for this related item?

Taxes are due on the due date, regardless of whether you receive a bill or not. It’s up to you to know when they’re due and make sure that you pay them on time. You, unfortunately, are responsible for the screwup and must pay the late fees and charges. Sorry.

Property taxes in MO are due on Dec 31st and every year you’ll see long lines at the tax collector’s office as folks scramble to find out what the taxes are and pay them on time. My county has a terrible record on getting bills out on time and 4 of the 8 years I’ve owned property here the bill arrived after Jan 1st.

County commissioners considering property tax hike