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How to Accurately Calculate Property Taxes

Businessperson Calculating Property Taxes on Calculator

Property tax estimates are very important for financial planning, legal compliance, and real estate investment budgeting. They help property owners allocate funds, check property value, evaluate investments, and compare taxes across locations. Calculating property taxes can be useful in decision-making, and financial management, securing observance of tax regulations.

Key Numbers to Know

To calculate the property tax for residential real estate, you first need to know and assimilate a handful of vital numbers:

  • Fair Market Value: Denotes the value determined in an open and competitive market where buyers and sellers can haggle and reach an agreement. Fair Market Value is a term oftentimes used in real estate transactions, property assessments, and tax computations.
  • Assessed Value: Refers to the value assigned to a property for taxation purposes by a local tax assessor or property appraiser. It considers the property’s value based on market conditions, property characteristics, and similar transactions. It is used to figure out or compute property tax liabilities, with tax rates applied to the assessed value to compute the amount the property owner owes.
  • Mill Levy: The tax rate applied to a property’s determined It is written in “mills,” with one mill equal to one-tenth of a cent. The local taxing authority sets the mill levy and denotes the tax amount per dollar of the estimated value.

With these numbers in hand, you can now calculate your property tax.


How to Calculate Property Tax

The formula to calculate property tax is in this fashion: Property Tax = Assessed Value × Tax Rate.

Calculate property taxes by multiplying the assessed value by the tax rate set by the local taxing authority. For example, if a property’s estimated value is $200,000 and the mill levy for your area is 4%, the property tax you will likely pay yearly is about $8,000.


Alternative Methods

Searching for local tax assessors or municipality websites is a swift and easy way to find property tax amounts without going through the usual calculating process. Property tax lookup tools are characteristically available on these websites, giving the chance for users to search for property tax information by inputting the property address.

These internet systems safeguard accuracy and bestow information, in particular, assessed value, tax rate, and exemptions or deductions. That being said, not all jurisdictions yield this service or have up-to-date systems, so for the most accurate and up-to-date property tax information, just contact the local tax assessor’s office for yourself.

Based on your property address and sales price, online property tax calculators estimate the yearly property tax reasonably. Take note though, these values may not explicitly represent your property tax liability considering there are unidentified exemptions, deductions, and additional assessments.

Take counsel from local tax authorities or professionals for correct and accurate property tax information. Online calculators can extend a good starting point for projecting your property tax liability, helping you to make informed financial decisions, budget, and analyze house affordability.


RPM Masters imparts investors such as you market analyses and other tools to allow you to optimize profitability of your properties and invest more prudently and confidently in your next income property. Contact us today or give us a call at 510-398-8704 to find out more about what we have to offer.


Originally Published on May 21, 2021

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