Depending on the area where you live, your new home is subject to annual property taxation by your local appraisal district to pay for schools, infrastructure, and other public needs. But what you may not realize is that the rate you pay may be wildly different from the rate your neighbors pay.
If you just purchased your home, your assessment for the following year is likely to be much higher than it is now, so you can’t count on paying the same amount in escrow that you’re paying now.
According to BankRate.com, property taxes are assessed by:
- Most recent assessed value or sales price of the home.
- Value of comparable homes in the area.
- Improvements that enlarged or added value to the home.
- Exemptions for which the home or homeowner qualifies, such as homestead or senior status.
- Applicable property tax rate set by the local taxing authority.
Appraisal districts use what’s known as a mill levy or millage rate. One mill represents one tenth of one cent, so for every $1,000 of assessed property value, one mill would be equal to one dollar. The mill levy is then multiplied by the assessed value of your property. Other factors that impact your levy include how often your taxing authority reassesses your property, how often it can raise rates, and by what percentage. Plus, the appraisal district can raise rates based on market trends as well as a drive-by appraisal.
Learn what tax rates are in your area at sites such as Smartasset.com and Bankrate.com.