Your Guide to Understanding a Property Tax Levy

Melanie Green
Expert Contributor
Last Updated:
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No matter where you live in the country, you will have to pay property taxes if you own a piece of real estate. Property taxes are a way of funding local governments. By levying a tax on every property owner, the local government gains a wide net of income resources that it can use to support government operations. If you own property, then here is your guide to understanding a property tax levy.

Property taxes have been in existence for hundreds of years and continue to be a local government’s main source of funding. The rates for these taxes are based on the overall value of the owned property. This can make calculating the value of your taxes more complicated. However, there are limits in place to control how much a local government can levy from taxpayers at a single time.

What Is a Property Tax?

Property taxes are taxes that are levied from all property owners within a given area based on the value of their property. In most places, property taxes are paid up to twice per year based on how the government operates. All property owners are required to pay their property taxes. Failing to pay those taxes can result in stiff consequences for the property owner.

How Are Property Taxes Calculated?

Property taxes are generally assessed based on two factors:

  • The appraised value of the property
  • The needs of the local government that receives funding from the taxes

Each property in an area is assessed to determine its value. This calculation can include an appraisal of the land itself, what is on the land or what it is used for, its location in the city, and the value of the area around it. Properties are assessed based on the guidelines of the local government.

Your Guide to Understanding a Property Tax Levy

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The other factor in calculating property taxes is the needs of the local government. Your local government is responsible for providing infrastructure and services to support the community. For example, local governments often build roads, fund schools, and provide civil services like police and firefighters. The funds to manage all of these services and to build the city’s infrastructure come in large part from property taxes.

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The amount that you owe in property taxes changes over time. When the cost of offering amenities increases, your property tax can increase as well. If the value of your property decreases, your taxes can decrease as well. The amount that you owe in taxes is proportional to these two factors.

Why Are Property Taxes Levied?

Property taxes are levied by the government. This means that the government has the ability to seize your property if you do not pay your property taxes. A property tax levy is the right to seize an asset as a substitute for non-payment. Therefore, not paying your property taxes can result in the government seizing your property as payment.

Governments enforce a property tax levy as a measure of last resort. The idea of a levy is that the government will take the property because you are unable to or refuse to pay what you owe on it. In that case, the government will sell the property and use the earnings to pay your back taxes.

Property taxes are levied because they are essential to the functioning of the government. Without property taxes, most local governments have no way of paying for their operations. To resolve this, every property owner is assessed property taxes — although there may be a few exceptions based on the local tax code.

Can You Be Exempt From Property Taxes?

While the vast majority of property owners pay property taxes, some common exceptions allow certain people to pay only a portion of their property taxes or be exempt entirely. To be assessed property taxes, you must own the property. Therefore, renters do not pay property taxes, but the person who owns the building does. Depending on where you live, you can be exempt or pay less on your property taxes according to the following:

  •  Veterans can pay a reduced tax rate.
  •  People living below the poverty line can pay a lower rate or be exempt.
  •  People with disabilities can be exempt.
  •  People with multiple residences for vacations can pay a reduced rate on one of these properties.

How Are Tax Rates Set?

Property tax rates are set by the voters, either directly or indirectly. In some places, rate increases of a certain size are voted on during elections. Most governments are able to raise property taxes on their own. However, this raise is limited to 1 percent each year without the approval of voters. The federal government put this provision in place to allow municipalities to raise their rates to keep up with rising costs but limit them so that voters still have control over the rates that they pay.

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Property tax rates are also affected by the use of the land being assessed. There are four general types of property with their own associated tax rate. These types are as follows:

  •  Land — the space that is owned.
  •  Improvements — permanent structures built on the land.
  •  Personal Property — anything placed on the land that can be owned and moved.
  •  Intangible Property — anything that can be owned but does not have a physical presence.
  •  Real Estate — land with improvements.

Different tax rates can be assessed for different land types too. This is done because different land types have different uses that may generate money. Generally, property types that do not generate money are taxed at a lower rate.

How Are Property Taxes Paid?

Property taxes are assessed and paid in three different ways based on the municipality that you live in. Taxes can be paid on an annual, biannual, or quarterly basis. In a yearly payment system, the government sends you a notice of when and how much your taxes are. You can get this notice up to eight months before they are due, which gives you more than enough time to try to set aside money for taxes. A biannual system assesses taxes twice per year. Otherwise, you could be required to pay your taxes quarterly.

Most places have property taxes that are paid annually. This is often the most successful method since there is plenty of time for citizens to gather the funds needed to pay for their services. Typically, there are penalties you will be required to pay if you pay your property taxes late. Some counties will give you a discount if you pay your property taxes early as a result of not having to send you physical notices and reminders in the mail.

If you mortgage a home, you probably pay for your home’s property taxes into an escrow account that your mortgage company sends in for payment. Once you pay off the home in full, you will be required to pay the property taxes on your own. You may receive notices of increased property taxes in the mail that you do not need to pay if you have an escrow account for property taxes through your mortgage company.

Depending on where you live, you will have access to a variety of payment options for your property taxes. This includes the following:

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  •  Check
  •  Cash at a local tax collector’s office
  •  Money order
  •  Credit card
  •  Debit card
  •  Using an online portal
  •  Phone payments

Some counties charge additional fees based on payment method. For instance, you might be charged more for credit card processing or to go to a branch to pay it. Checks by mail and automatic debit are typically the least expensive ways to pay for property taxes.

The Problems With Assessing Taxes

Although property taxes have been around for a long time, there are still some inherent problems with how property taxes are assessed. One of the leading issues is that property taxes are assessed on the value of the property. The value of a property can change wildly based on a range of different economic factors. That means that property taxes are assessed based on a measure that is volatile and unpredictable.

To resolve this issue, property tax calculations can return to a previously used method. Property taxes used to be assessed based on the size of your property rather than its value. This would stabilize the tax base for the area, as it would allow the government to levy a consistent amount of taxes from each property owner.

Many of the methods that were used to assess property taxes are a product of changing priorities within the policies of the government. Assessing taxes by the size of the land might be more consistent, but it does not allow the government to make up for economic forces like inflation. That’s why the tax method shifted to assessing based on the output of the property. This was often measured by the income of the owner. This too could be a problem since incomes were directly subject to market conditions.

Over time, the focus moved toward finding out how much an owner could afford to pay for the property based on what it produced and the needs of the family. This method offered flexibility in its assessment values to some degree, but it also ran into issues with assets being hidden. Intangible assets are notoriously difficult to find if a taxpayer is trying to hide them. With this in mind, it could be possible that the government is losing a lot of money due to the growth in hidden assets.

What to Do If You Disagree With Your Property’s Tax Assessment

Some people do not agree with the amount that the tax assessor gave for their property and choose not to pay their property taxes. This is not the correct way to appeal the property tax assessment. This will lead to a levy being placed against your property.

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If you feel that your property has not been assessed correctly, you should file an appeal. Do not stop making property tax payments during this process. You can go to your local tax collector’s office to file an appeal or to question the assessor’s findings. Bring along examples of what comparable properties look like and the rate they have been assessed at. It is possible that the tax office will look into your appeal.

What Is a Tax Deferral?

A property tax deferral is a delay in paying your taxes. In some cases, it is possible to get a deferral for your taxes based on several factors. These include hardship and job loss.

To qualify for a deferral, you must file a request before you reach the date that your taxes are due. You will also need to demonstrate the need for a deferral, since deferrals are not given without a specific need for them. They are a measure that is used after other options have been exhausted.

Some places don’t allow the existence of tax deferral programs, even ones that are not sponsored by the state. In these places, there are several organizations that create their own tax deferral programs. However, it can be difficult to get approved for one of these other types of tax deferrals without demonstrated need. Some of these organizations pay the taxes on your behalf as a loan, which you pay back to them directly.

Final Thoughts

A property tax levy can make it difficult to do anything with your property. In order to sell your property, you must clear the levy first. To clear a levy, you will need the help of a qualified professional, since levies are part of a legal procedure.

You can find the help that you need in a growing number of places, but finding a qualified professional that will do the job right the first time can be tricky. At Solvable, we review companies that can help you with a lien or a levy. By reviewing the information that we have at, you can quickly find the support that you need. We can also help you learn more about levies, property taxes, and how to effectively deal with a property tax levy so that you can get out of debt.

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Melanie Green
Expert Contributor
Last Updated: