what is property tax 
a property tax is an annual or semiannual charge levied by a local government and paid by the owners of real estate within its jurisdiction property tax is an ad valorem tax meaning the amount owed is a percentage of the assessed value of the real estate property tax receipts are the main source of revenue for most local governments in the u s they are used to fund schools police and fire departments road construction and repair libraries water and sewer departments and other local services that benefit the community in common usage property tax refers to a tax on immovable possessions like structures or land some local jurisdictions also assess property taxes on moveable property such as vehicles and industrial equipment investopedia dennis madambaunderstanding property taxproperty tax is paid by individuals or legal entities such as corporations that own real estate a tax is assessed on an individual s primary residence second home rental property and other real estate they may own such as commercial property property tax is not assessed to renters in homes apartments or condos it is characterized as a regressive tax that is the same rate of taxation is applied regardless of the taxpayer s income the burden falls disproportionately on lower income taxpayers 12the tax is usually based on the value of the owned property including land and structures many jurisdictions also tax tangible personal property such as cars and boats property tax rates and the types of properties taxed vary by jurisdiction in most organization for economic co operation and development oecd countries immovable property tax represents a low proportion of federal revenue when compared to income taxes and value added taxes the average rate in the united states is substantially higher than in many european countries 3 many empiricists and pundits have called for an increase in property tax rates in developed economies they argue that the predictability and market correcting character of the tax encourage stability the state with the lowest effective real estate tax rate i the u s at 0 29 alabama and colorado round up the list of lowest rates 4calculating property taxthe amount owners owe in property tax is determined by multiplying the property tax rate by the current market value of the property most taxing authorities recalculate the tax rate annually almost all property taxes are levied on real property which is legally defined and classified by the state real property generally includes land structures and other fixed buildings 56ultimately property owners are subject to the rates determined by the municipal government the municipality appoints or elects a tax assessor who evaluates local property and calculates property taxes based on current fair market values this value becomes the assessed value of the home in almost all local property tax codes the owner has the right to formally contest the rate assessed when property taxes are unpaid the taxing authority may assign a lien against the property property tax vs real estate taxpeople often use the terms property tax and real estate tax interchangeably in fact not all property taxes are real estate taxes many jurisdictions also levy property taxes against tangible personal property according to a report by the tax foundation 43 states tax tangible personal property 7both types of property can be deducted from federal taxes however since the tax cuts and jobs act of 2017 the deduction has been capped at 10 000 per year for married couples and single taxpayers 8so here s the difference real estate taxes are taxes on real property only property taxes can include both real property and tangible personal property 