How Is My Tax Bill Calculated?

December 15, 2011

Daniel D. Tartaglia, Esq.

Remember that the real property tax is an ad valorem tax, or a tax based on the value of property. Two owners of real property of equal value in the same municipality should pay the same amount in property taxes. Also, the owner of more valuable property should pay more in taxes than the owner of less valuable property.

The property tax differs from the income tax and the sales tax because it does not depend on how much money you earn or on how much you spend. It is based totally on how much the property you own is worth. For example, if an assessor assesses property at 15 percent of value, a house and land with a market value of $100,000 would have an assessment of $15,000. With no exemptions, this is the property’s taxable assessed value. This $15,000 is not the tax bill. The tax bill for this house depends on the municipality's tax rate. The tax rate is determined by dividing the total amount of money that has to be raised from the property tax (the tax levy) by the taxable assessed value of taxable real property in a municipality.

If, for example, a town levy is $2,000,000, and the town has a taxable assessed value (the sum of the assessments of all taxable properties) of $40,000,000, the tax rate would be $50 for each $1,000 of taxable assessed value.

$2,000,000 / $40,000,000 = .050 x $1,000 = $50 (tax rate)

The town tax bill for this house with an assessment of $15,000 would be $750. The $750 results from dividing the assessment of $15,000 by $1,000 to get $15 (because the tax rate is based on each $1,000 of assessed value). Then, the $15 is multiplied by the tax rate to get the tax bill of $750.

$15,000 / $1,000 = $15 x $50 = $750 (tax bill)

As you can see, the size of the tax bill depends on both the assessment and the tax rate, which is based on the tax levy.