How Are Property Taxes Calculated?
Unraveling how property taxes are calculated can often feel rather confusing and byzantine. However, it is important to understand as it is one of your larger expenses as a home owner. How property taxes are calculated vary widely across the country and even within the same jurisdiction they can vary.
What are property taxes?
First, I need to be clear that in this context, when I refer to property taxes, I am actually referring to real property taxes. ‘Real property’ is also known as real estate, and refers to the land you own and everything affixed to it. Something that is not considered real property is a mobile home, that is not ‘affixed’ to the property and for taxation purposes, is considered personal property. Other personal property that is taxed includes cars, at least in Virginia, and boats.
If you own a condo, you might be thinking you don’t own any land. Well, you actually do. You own a proportionate share of all the land owned by the association. You also own a proportionate share of the entire building in addition to your unit.
Property Tax Layers
Most people know that their property taxes are calculated based on a percentage of the value. That is true, but that percentage can be comprised of multiple intersecting tax jurisdictions such as city, county, state, and school district. Some even have tax jurisdictions for fire districts, library districts and even cemetery districts.
Who determines the value?
Who determines the value of your property for taxation purposes? In Arlington, it is the county assessor. The assessor doesn’t go around and inspect or evaluate every home. Rather they make blanket assessments over a small area. In Arlington, assessments are made once a year.
Assessed vs Appraised vs Market value
Don’t confuse assessed value with appraised value. As I mentioned, in Arlington, assessed values are calculated once a year by the county assessor.
Appraised values are determined by a licensed appraiser who will usually visit the property and determine the value in today’s market. Appraisers can also be used to determine the value of a property for a particular time in the past. This can be done for estate purposes when the heirs need to determine the value of the property at the time they inherited the property.
Even though appraisers use certain guidelines to calculate the value, it is still part science and part art. You can have three different appraisers value a property and each one can come up with a different answer.
Market value can be different altogether. The market value is simply what a buyer is willing to pay and a seller is willing to sell for in an open market.
What are the rates in Arlington?
For residential properties in Arlington, the property tax rate is expressed in dollars per one hundred dollars of assessed value. In Arlington, for 2022, the tax rate is 1.013 per $100 of assessed value plus a Sanitary District Tax of $0.017 for a combined rate of $1.03 per $100 of assessed value . For example, a property assessed at $400,000 would owe property taxes of 1.03/100 x $400,000 = $4,120.
When are taxes paid?
In Arlington, property taxes are paid twice a year - in June for the first half of the year and October for the second half of the year. If you have a mortgage on your property, you are most likely paying property tax along with your mortgage payment every month to your lender or loan processor. The lender will in turn pay the taxes to the county when they are due in June and October.
Why does the lender collect them?
Is the lender just trying to friendly and pay your taxes for you as an added service? No. The lender is collecting tax money from you each month and then paying the taxes because they want to make sure the taxes get paid. A tax lien is superior to a mortgage lien. That means if the taxes were not paid, the county could place a lien on your property. If they took it further and foreclosed on your property to get their taxes due, the county would get paid first out of the proceeds before the mortgage holder would.
