Define Property Taxes

Property taxation can me a significant monetary consideration for homeowners, drawing hundreds of thousands of dollars into the local government. While tenants do not directly pay land tax, people who purchase a home quickly understand just how this tax works. Understanding property taxation can help you prepare and budget for them accordingly.


Real estate tax is a tax that governments impose on property. It is what’s called an ad valorem tax, meaning it is predicated upon the value of their property. People with a home or land that has a higher value cover more in property taxes, even though everyone inside a given municipality pays property tax at the identical level percentage rate.


Several different groups of taxpayers are responsible for paying property tax. Personal individuals who own real property, including land and improvements to this land, such as houses and other structures, or personal property, like boats, aircraft or home office equipment, must pay tax on such property. In addition, property tax must be paid by landlords on their land and property. The same is true for business owners, whose personal property might include industrial equipment and machinery.


Property tax is based upon the value of the property of the taxpayer. The state of California has a rather typical system, with county assessors that have experience in local building codes and trends inspecting property and determining the value for tax purposes. Taxpayers may also file a grievance in an attempt to lower the appraised value of the property, which would result in a lower tax obligation if accepted.


Local governments use the money collected from property taxes for any number of applications. Nearly all real estate tax revenue goes toward financing county and city governments, including meeting payroll for town workers. Property taxes also fund public schools, such as local school districts and community schools. Finally, some land tax revenue ends up financing community developments like mass transit construction and maintenance.

Maximum Taxation

Every municipality with the capacity to levy taxes might have the power to impose a separate property tax. It follows that homeowners might be responsible for property taxation from many municipalities, including the city, county and school district. But, local laws may limit the maximum property tax rate. This is true in California, in which 1978’s Proposition 13 set the property tax limit at 1% of assessed value.

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