How to estimate property taxes on a new home purchase.
About Property Taxes
Property taxes are assessed by local municipalities to pay for things such as local public schools, parks, and other municipal expenses. It can be confusing to estimate your new property taxes when buying a home.
When you buy a home, the property taxes are typically assessed based on the purchase price. You could end up paying significantly higher property taxes than the previous owner, especially if the previous owner has lived in the home for years and the taxable value is less than the purchase price.
For example, let's say that the previous owner has owned the house for 20 years and the taxable value is 300,000. However, the house is worth much more, and you pay $800,000. In this scenario, your new taxable value could be $800,000 and at a 2% tax rate, the new tax bill could be $16,000/year even though the previous owner paid just $6,000.
Estimate Property Taxes on a Home Purchase
Use this calculator to determine the new tax bill on a home purchase. The results will update as you type. Your local government should have data about the tax rates and millage rates. You'll need to find out how the taxable value is calculated. Many times, the accessed and taxable values are 50% of the actual purchase price of the home.
Understanding the Tax Bill
Many times, a property is accessed at 50% of the value of a property. The taxable value often has a cap on the amount that it can increase but this depends on the municipality. This is why long time home owners often have taxable values much less than assessed values.
The millage rate is a number used by local governments to assess taxes. It is expressed as a dollar amount for every $1,000 in taxable value. For example, 40 mills would equal $40 in property taxes for every $1,000 of taxable value. It is common for localities to have millage votes. For example, they might approve a $1 millage for schools. This means that taxes will increase $1 for every $1,000 of taxable value of a property.
Value that the assessor gives to the property. This is usually less than the actual value of the home.
The value that is used to calculate property taxes.