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How to Accurately Calculate Property Taxes

Businessperson Calculating Property Taxes on CalculatorAs a Towson rental property investor, it is advisable to learn how to accurately calculate property taxes on real estate. One of the principal factors for this is that the sum of property tax you will have to pay on any property should be part of your initial calculations when choosing whether to get it or not. But property taxes will continue to play an important role in your cash flows and budget for as long as you own the property. Knowing how to accurately calculate property taxes is a valuable skill each rental property owner needs to develop.

Key Numbers to Know

To calculate the property tax for residential real estate, you must first know a few important figures:

  • Fair Market Value. Primarily, you’ll need to know the property’s fair market value (FMV). This is the rate that an informed seller would be willing to pay for the property.
  • Assessed Value. After that, you’ll need to understand the property’s assessed value. This is not similar to the fair market value of the property. A property’s assessed value depends on the basic features, most recent purchase price, and comparable properties. Mostly, the property’s assessed value will be approximately 80% to 90% of the fair market value.
  • Mill Levy. In conclusion, you’ll need to learn the tax assessment rate, or mill levy, for real estate in your neighborhood. The local tax rate is typically accessible on the local tax assessor’s website.

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

How to Calculate Property Tax

Property taxes are calculated by getting the mill levy (tax assessment rate) and multiplying it by the property’s assessed value. Let’s say, if the assessed value of a property is $200,000 and the mill levy for your place is 4%, the sum of property tax you have to pay yearly is about $8,000.

Alternative Methods

Another option to know a property tax amount without needing to undergo the procedure as described above is to do some research on your local tax assessor or municipality website. Property taxes are deemed a matter of public record, and it is often the case that you can look up the most recent property tax bill for any house using the address.

If such data is outdated or unavailable, another alternative method is to use an online calculator to help you estimate your yearly property tax. These online tools typically encourage you to know the property’s address and sales price, which are both easier to acquire than other figures. The main downside of this method is that it cannot provide you an exact number. Even so, the estimate you acquire from the calculator could be near enough to be able to crunch your numbers or build a reliable budget for your property.

Calculating property taxes is a significant element of owning profitable rental homes in Towson. However, if these and other duties are challenging or time-consuming, why not hire Real Property Management Metro to perform them for you? Our rental management experts offer investors like you fair market analyses and other tools to help you improve the cost-effectiveness of the properties you currently own and invest more confidently in your next income property. Contact us today or give us a call at 410-290-3285 to find out more about what we have to offer.

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