What Does Property Tax Pay For
If you own a home, you’re no stranger to paying property taxes. Sometimes, you might even wonder where that money goes after you pay it. Tax time might not be your favorite time of year, but it’s helpful to remember that the taxes you pay today determine which public services you enjoy tomorrow.
Property taxes are levied in all 50 states and the District of Columbia. They form an essential base of revenue for your local government and are a key part of funding the services and amenities that you enjoy as a resident, including parks, roads and schools. It can be helpful to think of your taxes as an investment in your community that improves your family’s quality of life.
Your Tax Dollars at Work
Property tax is a significant source of local government revenue. Your town or city is the one that handles most of the services and community features you enjoy, such as parks, roads or schools. Let’s dive into how your taxes are distributed and used.
The bulk of your school district’s budget comes from your state and local government. States set their education budgets based on a minimum amount of funding per student. From there, property taxes are levied by your local government and given to your school district. The state then uses their funds to fill in the gap between what the school district has raised from property taxes and the minimum funding level.
School districts with higher property tax rates, and thus more revenue, tend to need less state funding and often break past the minimum funding level for their students. With more cash, these school districts are better able to serve their students’ needs. They can build new facilities or renovate old ones, purchase newer textbooks and educational materials or invest in new technology to make teaching and learning easier. Your property taxes can be seen as an investment in the education of the next generation.
Fire fighters, emergency medical services and law enforcement are funded primarily by the city or county that you live in, making those taxes an important tool that funds the services that keep you or your neighbors safe in case of an emergency. Property taxes are the main source of revenue for public safety services. Emergency services that are well-funded respond more quickly when you need them and have better tools and resources on hand to potentially save a life.
Parks and Public Facilities
Libraries, parks and other communal facilities are wonderful features to have in your community. They are a great place to relax, meet your neighbors or learn something new, and their presence tends to make the value of your property higher. Public facilities are another major benefactor of your property taxes, but they are also funded by revenue from municipal services or bonds. Bonds are voted on by citizens to finance large-scale projects for their community, such as park improvements or a new library branch. Your local taxes may rise after a bond passes, but you will at least know how that extra money is being spent.
Roads, Public Transit and Infrastructure
Responsibility for road maintenance is shared between the federal, state and local government. The street you live on is paid for primarily by your property taxes, and those funds are also used to improve sidewalks, install bike lanes and expand public transit options in your city. Having robust infrastructure in your city or town makes getting around a lot easier no matter how you do it. New roads cause less wear and tear on your vehicle if you drive and dedicated pedestrian paths and sidewalks keep walkers safe. Well-planned infrastructure and access to public transportation makes your home and neighborhood a more valuable place to live.
Remember, every city and state plans their budget a little differently. Even within a state or county, property tax rates vary greatly, so your city may budget things or levy additional taxes or fees in their own way customized to their locale. For example, many places with a high property tax have lower sales taxes to compensate and vice-versa. If you’re interested in how taxes are spent in your community, it helps to reach out to your state or local treasury or attend a city council meeting.
Managing your Tax Bill
Property taxes are essential to help your community function, but that doesn’t mean that you can’t make the process of paying these taxes more manageable. Thankfully, you can deduct property taxes from your federal tax bill if you itemize. Additionally, if you suspect that your property value has declined and that your property tax bill is no longer accurate, you can have your home value reassessed. If the assessment finds that your property’s value has truly declined, you might be able to get your tax obligations lowered, keeping some of that money in your pocket for other expenses.
Building Value at Home and in Your Community
Funds raised from property taxes are the most essential resource your community has to strengthen itself. Well-funded schools mean that your children are better educated. A fully-funded EMS is more easily able to help you in an emergency. Robust infrastructure and parks make your neighborhood a more enjoyable place to live.
The value that your property taxes bring doesn’t stop with recreational opportunities or aesthetic value. Making your neighborhood a safer, more pleasant place to live also makes the value of your home go up, allowing you to build equity faster. Equity is an important tool for you to have at your disposal. It makes refinancing easier, allowing you to snag a lower interest rate on your mortgage or move to a loan with a shorter term. You can also use the value of your equity to make repairs and renovations or open a home equity line of credit (HELOC) to pay for unexpected expenses.
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