Property tax

Property tax

Overview
A property tax is an ad valorem levy
Ad valorem tax
An ad valorem tax is a tax based on the value of real estate or personal property. It is more common than a specific duty, a tax based on the quantity of an item, such as cents per kilogram, regardless of price....

 on the value of property that the owner is required to pay. The tax is levied by the governing authority of the jurisdiction in which the property is located; it may be paid to a national government, a federated state or a municipality
Local government
Local government refers collectively to administrative authorities over areas that are smaller than a state.The term is used to contrast with offices at nation-state level, which are referred to as the central government, national government, or federal government...

. Multiple jurisdictions may tax the same property.

There are three species or types of property: land, improvements to land (immovable man-made objects, such as buildings), and personal property (movable man-made objects).
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Encyclopedia
A property tax is an ad valorem levy
Ad valorem tax
An ad valorem tax is a tax based on the value of real estate or personal property. It is more common than a specific duty, a tax based on the quantity of an item, such as cents per kilogram, regardless of price....

 on the value of property that the owner is required to pay. The tax is levied by the governing authority of the jurisdiction in which the property is located; it may be paid to a national government, a federated state or a municipality
Local government
Local government refers collectively to administrative authorities over areas that are smaller than a state.The term is used to contrast with offices at nation-state level, which are referred to as the central government, national government, or federal government...

. Multiple jurisdictions may tax the same property.

There are three species or types of property: land, improvements to land (immovable man-made objects, such as buildings), and personal property (movable man-made objects). Real property (also called real estate or realty) means the combination of land and improvements. Under a property tax system, the state requires and/or performs an appraisal
Real estate appraisal
Real estate appraisal, property valuation or land valuation is the process of valuing real property. The value usually sought is the property's Market Value. Appraisals are needed because compared to, say, corporate stock, real estate transactions occur very infrequently...

 of the monetary value of each property, and tax is assessed in proportion to that value. Forms of property tax used vary between countries and jurisdictions.

A special assessment tax
Special assessment tax
Special assessment is the term used in the United States to designate a unique charge that government units can assess against real estate parcels for certain public projects. This charge is levied in a specific geographic area known as a Special Assessment District...

 is sometimes confused with property tax. These are two distinct forms of taxation: one (ad valorem tax) relies upon the fair market value of the property being taxed for justification, and the other (special assessment) relies upon a special enhancement called a "benefit" for its justification.

The property tax rate is often given as a percentage
Percentage
In mathematics, a percentage is a way of expressing a number as a fraction of 100 . It is often denoted using the percent sign, “%”, or the abbreviation “pct”. For example, 45% is equal to 45/100, or 0.45.Percentages are used to express how large/small one quantity is, relative to another quantity...

. It may also be expressed as a permille
Permille
A per mil or per mille is a tenth of a percent or one part per thousand. It is written with the sign ‰ , which looks like a percent sign with an extra zero at the end...

 (amount of tax per thousand currency
Currency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...

 units of property value), which is also known as a millage rate or mill levy. (A mill
Mill (currency)
The mill or mille is a now-abstract unit of currency used sometimes in accounting. In the United States, it is a notional unit equivalent to of a United States dollar...

 is also one-thousandth of a currency unit.) To calculate the property tax, the authority will multiply the assessed value of the property by the mill rate and then divide by 1,000. For example, a property with an assessed value of US $50,000 located in a municipality with a mill rate of 20 mills would have a property tax bill of US $1,000 per year. In more familiar terms, dividing the mills by 10 (moving the decimal point to the left by one) yields the percentage rate ; for example, 20 mills = 2.0%.

Property tax rates, assessment rules, and valuations vary widely by jurisdiction. Some jurisdictions adjust assessed values to fair market value periodically, and some have limits on such adjustment. Property taxes are often assessed at the local level, under local rules, so assessments, rates, and valuations may vary widely within a particular state, province, or country.

Australia


Australia has property taxes known as property or land rates. Land rates and frequency of payment are determined by local councils. Each council has land valuers who value the land's worth. The land's worth is the value of the land only; it does not include existing dwellings on the property. The assessed value of the land determines the total charges of rates. Rates can range from $100 per quarter to $1,000 per quarter depending on the location and value of the land. Quarterly payments are common, but frequency varies by locality. Australian property owners also pay water rates. Some councils include this in the total of the rates notice and provide a breakdown of water and land charges. Other councils may charge this separately. Depending on the municipality, water rates can be either a flat fee, user pay or a combination of both. Prospective buyers can get details about land and water rates from the local council before purchase.

Australia also has stamp duty, applied at the time a property is sold, by the purchaser to the Office of State Revenue. In addition to stamp duty there is also a Land Transfer Charge under the NSW State Revenue Legislation Amendment Bill 2010 (1 July 2010). The Charge will be levied as an ad valorem tax to be paid by the purchaser, for property above $500,000 in value, and is payable at the time a transfer document is lodged for registration with Land & Property Information (LPI).

Stamp duty rates are applied on a sliding scale of 1% to 6.75% based on the value of property and the state of Australia.

Canada


Many provinces in Canada levy property tax on real estate based upon the current use and value of the land. This is the major source of revenue for most municipal governments in Canada. While property tax levels vary among municipalities in a province there is usually common property assessment or valuation criteria laid out in provincial legislation. There is a trend to use a market value standard for valuation purposes in most provinces with varying revaluation cycles. A number of provinces have established an annual reassessment cycle where market activity warrants while others have longer periods between valuation periods.

Calculating Individual Property Taxes

In Ontario, for most properties (e.g., residential, farms), the property taxes can be calculated by multiplying the phased-in assessment indicated on the Property Assessment Notice by the tax rate.

Municipal tax rate x phased-in assessment for the particular taxation year = municipal portion of tax
county/regional tax rate x phased-in assessment for the particular taxation year = county/regional portion of tax
education tax rate x phased-in assessment for the particular taxation year = education portion of tax

municipal portion of tax + county/regional portion of tax + education portion of tax = Total Property Tax

In some cases (e.g., commercial, industrial, multi-residential properties), the Province or municipality may implement measures that affect the actual taxes paid on a property.

Chile


Land property taxes, called "territorial tax" or "contributions", are paid annually in four payments during the year. The rate varies between 1 to 2% of the fiscal value, depending on the use of the property (agricultural, habitation, commercial). The fiscal value is determined for each property by the Internal Tax Service, based on the land area and built area, the value of the construction materials, age, use and distance to commercial areas. The fiscal value is usually much lower than the market value. Non-business properties valued below a certain fiscal value are exempt (currently about USD$33K). Properties used for business face no exemption. The collected taxes go to the municipality where the property is located. All municipalities contribute a share of the received income to a "common municipal fund", which is then redistributed back to all municipalities according to its needs (poverty rate, etc.).

Greece


The Greek property tax of 2011 is based upon floor-area and is to be collected with electricity bills.http://www.progress.org/2011/fold735.htm

Hong Kong


In Hong Kong , there is a kind of tax named a property tax, but it is not an ad valorem tax
Ad valorem tax
An ad valorem tax is a tax based on the value of real estate or personal property. It is more common than a specific duty, a tax based on the quantity of an item, such as cents per kilogram, regardless of price....

; it is actually classified as an income tax
Income tax
An income tax is a tax levied on the income of individuals or businesses . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate...

.

According to HK Inland Revenue Ordinance
Inland Revenue Ordinance Cap.112
The Inland Revenue Ordinance is one of Hong Kong's Ordinances. It regulates the inland revenue of Hong Kong.-The most commonly used Sections:IRO Section.2 Interpretation of some terms using in the ordinance.-Property tax:...

 IRO s5B, all property owners shall not be subject to this tax; unless the HK property owner has received a consideration
Consideration
Consideration is the central concept in the common law of contracts and is required, in most cases, for a contract to be enforceable. Consideration is the price one pays for another's promise. It can take a number of forms: money, property, a promise, the doing of an act, or even refraining from...

, the example is rental income for the year of assessment. The property tax shall be computed on the net assessable value at the standard rate.

Year of Assessment


The period of assessment is from April 1 to March 31 of the following year.

Net assessable value


The formula is:
Net assessable value = 80% of Assessable value.

HK property tax payable = Net assessment value X Property tax standard rate

Assessable value = Rental income + Premium + (Rental bad debt recovered — Irrecoverable rent) - Rates paid by owner.

Jamaica


This tax is paid in the same way as a mortgage, an annual payment depending on the value of one's assets, such as property.

India


Property tax or 'house tax' is a local tax on buildings, along with appurtenant land, and imposed on owners. It resembles the US-type wealth tax and differs from the excise-type UK rate. The tax power is vested in the states and it is delegated by law to the local bodies, specifying the valuation method, rate band, and collection procedures. The tax base is the annual ratable value (ARV) or area-based rating. Owner-occupied and other properties not producing rent are assessed on cost and then converted into ARV by applying a percentage of cost, usually six percent. Vacant land is generally exempt. Central government properties are exempt. Instead a 'service charge' is permissible under executive order. Properties of foreign missions also enjoy tax exemption without an insistence for reciprocity. The tax is usually accompanied by a number of service taxes, e.g., water tax, drainage tax, conservancy (sanitation) tax, lighting tax, all using the same tax base. The rate structure is flat on rural (panchayat) properties, but in the urban (municipal) areas it is mildly progressive with about 80% of assessments falling in the first two slabs. By all accounts, the property tax is under-utilised in the municipalities and not effectively used in the panchayats, mainly due to tax payer resistance.

Netherlands


Property tax (Dutch
Dutch language
Dutch is a West Germanic language and the native language of the majority of the population of the Netherlands, Belgium, and Suriname, the three member states of the Dutch Language Union. Most speakers live in the European Union, where it is a first language for about 23 million and a second...

: Onroerendezaakbelasting (OZB)) is levied on homes on a municipal basis in two parts: for the one who lives in the house, and for the owner of the house. Those with a rental home are liable only for the living part of the tax.

United Kingdom



There is currently no ad valorem tax on residential property. Two former systems were dropped because of their extreme unpopularity:
  • Schedule A income tax
    Income tax
    An income tax is a tax levied on the income of individuals or businesses . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate...

    , a central government tax that was levied on the imputed rent
    Imputed rent
    Imputed rent is the economic theory of imputation applied to real estate: that the value of a good is more a matter what the buyer is willing to pay than the cost the seller incurs to create it. In this case, market rents are used to estimate the value to the property owner...

    , that is the rent that owner-occupier
    Owner-occupier
    An owner-occupier is a person who lives in and owns the same home. It is a type of housing tenure. The home of the owner-occupier may be, for example, a house, apartment, condominium, or a housing cooperative...

    s of land would have been receiving from a tenant had they not been living in the houses they owned. However, actual (as opposed to imputed) rent is still subject to income tax under Schedule A.
  • Rates
    Rates (tax)
    Rates are a type of property tax system in the United Kingdom, and in places with systems deriving from the British one, the proceeds of which are used to fund local government...

    , a local government
    Local government
    Local government refers collectively to administrative authorities over areas that are smaller than a state.The term is used to contrast with offices at nation-state level, which are referred to as the central government, national government, or federal government...

     tax that was levied in proportion to the assessed value of property; this proportion was not fixed or set by a schedule or formula but floated according to the budget decided on by councillors (originally elected by only ratepayers), giving rise to a charge distributed proportionally over all the relevant properties. This was replaced under the Thatcher
    Margaret Thatcher
    Margaret Hilda Thatcher, Baroness Thatcher, was Prime Minister of the United Kingdom from 1979 to 1990...

     government by the Community Charge
    Community Charge
    The Community Charge, popularly known as the "poll tax", was a system of taxation introduced in replacement of the rates to part fund local government in Scotland from 1989, and England and Wales from 1990. It provided for a single flat-rate per-capita tax on every adult, at a rate set by the...

     (popularly known as "poll tax"), which proved even more unpopular than the rates, and was replaced by a mixed Council Tax
    Council tax
    Council Tax is the system of local taxation used in England, Scotland and Wales to part fund the services provided by local government in each country. It was introduced in 1993 by the Local Government Finance Act 1992, as a successor to the unpopular Community Charge...

     which combines elements of property tax and a poll tax. Rates are still (2010) levied on business property, though some classes of business are exempt.

United States



In the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

, property tax on real estate
Real estate
In general use, esp. North American, 'real estate' is taken to mean "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; an item of real property; buildings or...

 is usually levied by local government
Local government
Local government refers collectively to administrative authorities over areas that are smaller than a state.The term is used to contrast with offices at nation-state level, which are referred to as the central government, national government, or federal government...

, at the municipal or county
County
A county is a jurisdiction of local government in certain modern nations. Historically in mainland Europe, the original French term, comté, and its equivalents in other languages denoted a jurisdiction under the sovereignty of a count A county is a jurisdiction of local government in certain...

level. Rates vary across the states, between about 0.2% and 4% of the home value. The assessment is made up of two components—the improvement or building value, and the land or site value. In some states, personal property is also taxed. The property tax is the main tax supporting local education, police/fire protection, local governments, some free medical services, and most of other local infrastructure. Also, many U.S. state and local jurisdictions impose personal property taxes.